The global financial landscape experienced a seismic shock on February 3, 2025, as fears of escalating trade tensions triggered a massive sell-off across both traditional and digital markets. Asian equities plunged, with Japan’s Nikkei 225 tumbling over 1,000 points, while the cryptocurrency market faced one of its most brutal corrections in recent months — liquidating 72,000 traders and wiping out $2.21 billion in leveraged positions within just 24 hours.
Bitcoin and Ethereum Lead Crypto Sell-Off
Bitcoin, the flagship digital asset, dropped sharply from its recent highs near $106,000, falling below $91,130 at its lowest point. At press time, BTC was trading around $92,899, reflecting a 6.83% decline over the past day. This marks the fourth consecutive day of losses, signaling weakening bullish momentum.
Ethereum suffered even steeper losses, briefly plunging 25% to a low of $2,080.19 — its weakest level in nearly a year. Other major altcoins followed suit:
- Binance Coin (BNB): down over 15%
- XRP (Ripple): down more than 20%
- Cardano (ADA): down over 20%
- Dogecoin (DOGE): double-digit drop
- Solana (SOL) and SUI: both posted significant losses
TRUMP token, a politically themed meme coin, collapsed from $43 to **$15.55 in just 12 trading sessions, shedding nearly 64% of its value in weeks and another 17%** in the past 24 hours alone.
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Mass Liquidations Signal Market Stress
According to data from CoinGlass, the sudden volatility triggered catastrophic margin calls across exchanges. In total:
- 72,000 investors were fully liquidated
Total liquidation volume reached $2.21 billion
- Long positions accounted for $1.87 billion (84.6%)
- Short squeezes contributed $340 million
The largest single liquidation occurred on Binance involving Ethereum — a $25.6 million long position wiped out in minutes.
Market analysts describe this event as an “epic crypto crash,” driven less by internal blockchain issues and more by macroeconomic anxiety radiating from Washington.
Trade War Fears Spark Market Panic
The immediate catalyst behind the market plunge appears to be renewed protectionist rhetoric from former U.S. President Donald Trump.
On February 2, Trump announced plans to impose 25% tariffs on imports from Canada and Mexico, citing unfair trade practices. He also signaled upcoming tariffs on European Union goods.
In response:
- Canadian Prime Minister Justin Trudeau pledged retaliatory tariffs on $155 billion CAD worth of American products
- Mexico’s President Claudia Sheinbaum instructed economic officials to deploy both tariff and non-tariff countermeasures
This escalating tit-for-tat has reignited fears of a global trade war — a scenario historically detrimental to risk assets like stocks and cryptocurrencies.
“Trump’s tariff war is now impacting the entire market,” said Caroline Bowler, CEO of BTC Markets. “Concerns about trade disruption and stagflation are spreading. The fear of economic recession is spilling over into every corner of the financial world — including Bitcoin.”
Such macro-driven selloffs highlight that despite their decentralized nature, crypto markets are increasingly correlated with traditional finance during times of systemic stress.
Fallout Across Global Equity Markets
The ripple effects were felt far beyond crypto.
Japan’s Nikkei 225 index dropped over 1,000 points, closing down 2.7%, while the broader Topix index fell 2.4%. Export-heavy tech and auto stocks led the decline:
- TDK: -9%
- Denso Corp: -8.2%
- Mazda and Honda: both down over 7%
South Korea’s KOSPI index fell 2.54%, closing at 2,453.33 after losing 64 points.
U.S. futures followed suit:
- Nasdaq 100 futures: down 2%
- S&P 500 futures: down 1.7%
- Dow Jones futures: down 1.4%
Even China’s A50 futures saw sharp intraday drops, though sentiment stabilized slightly by late afternoon.
Hong Kong markets showed mixed results:
- Hang Seng Index: initially down over 2%, closed flat at +0.04%
- Hang Seng Tech Index: swung from -3% to finish up +0.29%
Notably, Alibaba-W surged over 5% early, hitting a new high amid positive sentiment around its cloud AI model pricing update.
Why Is Crypto So Sensitive to Geopolitical Risk?
While cryptocurrencies were once thought to be insulated from traditional market forces, recent trends show otherwise. During periods of uncertainty:
- Investors de-risk by selling volatile assets
- Liquidity dries up in leveraged trading markets
- Stablecoin outflows increase as traders seek safety
Moreover, many crypto investors are highly leveraged — amplifying both gains and losses during rapid price swings.
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The End of Bitcoin as Legal Tender in El Salvador?
Adding to bearish sentiment was news that El Salvador has effectively abandoned Bitcoin as legal tender.
Once hailed as the world’s first country to adopt BTC as official currency in September 2021, El Salvador quietly amended its Bitcoin Law in late January 2025 under pressure from the International Monetary Fund (IMF).
Key changes include:
- Making Bitcoin usage voluntary, not mandatory
- Removing requirement to pay taxes in BTC
- Repealing three sections and modifying six others of the original law
This reversal came as a condition for the IMF to approve a desperately needed $1.4 billion loan package for President Nayib Bukele’s government.
Public opinion had long been skeptical:
- 71% of citizens opposed Bitcoin adoption when it launched
- By end-2022, 91.7% said their financial situation hadn’t improved
Despite Bukele’s global promotion of El Salvador as the “Bitcoin Nation,” real-world adoption remains minimal.
Frequently Asked Questions (FAQ)
What caused the crypto market crash on February 3?
A combination of renewed U.S.-led trade war fears and technical market weakness triggered the selloff. Former President Trump’s announcement of new tariffs on Canada, Mexico, and the EU sparked broad risk-off behavior across financial markets.
How many people lost money in the crypto crash?
Over 72,000 traders were liquidated in 24 hours, with total losses reaching $2.21 billion, primarily due to leveraged long positions being automatically closed as prices fell.
Did El Salvador completely ban Bitcoin?
No. Bitcoin is still recognized as legal tender but is no longer mandatory for transactions or tax payments. Usage is now entirely optional — a major policy shift from its original implementation.
Is Bitcoin becoming more like traditional risky assets?
Yes. Despite its decentralized origins, Bitcoin increasingly behaves like a risk-on asset — rising during periods of economic optimism and falling during geopolitical or macroeconomic stress.
Can such crashes be avoided?
While crashes cannot be fully prevented, traders can reduce risk through strategies like position sizing, stop-loss orders, avoiding excessive leverage, and diversifying across asset classes.
What should investors do now?
Stay informed, avoid panic selling, assess portfolio risk levels, and consider dollar-cost averaging into positions rather than timing the bottom.
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Final Thoughts
The events of February 3 underscore a critical evolution in financial markets: digital assets are no longer isolated experiments but integrated components of the global economy. When trade wars loom and political rhetoric heats up, even decentralized networks feel the heat.
For investors, this means greater need for discipline, risk management, and awareness of macro trends — not just technical charts.
As volatility persists, those who prepare — rather than react — will be best positioned to survive the storm and thrive in the recovery.
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