Unprecedented Volatility Hits the Crypto Market
The cryptocurrency market witnessed its most significant correction in recent months during the weekend, primarily driven by the United States’ decision to impose new tariffs on Canada, Mexico, and China. As February commenced, the market saw a steep decline, with a 21% retracement from the highs recorded on Friday.
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Impact of US Tariffs on the Crypto Market
The announcement from US President Donald Trump regarding the imposition of additional tariffs on major trading partners, including a 25% tariff on imports from Canada and Mexico and a 10% tariff on imports from China, caused ripples across the financial markets. This decision significantly impacted the crypto market, leading to a sharp downturn.
Market Downturn: A Closer Look
Bitcoin (BTC), the leading cryptocurrency, experienced a staggering 12.5% drop over the weekend, plummeting to $91,000. Ethereum (ETH), the second-largest cryptocurrency by market capitalization, faced an even more severe decline, with prices falling over 35% to $2,100, marking its lowest value since September.
The fear of a potential global trade war exacerbated the situation, pushing most altcoins to their lowest levels in months. These developments resulted in a 21% drop in the total crypto market capitalization, marking the most significant correction since the infamous “Red Monday” of August 2024.
Market Reaction and Analysis
According to a recent report from Nansen, the crypto market appears to be “satiated with good news” and is increasingly sensitive to negative sentiments. This sentiment was evident during the weekend’s market turbulence, exacerbated by the recent DeepSeek-triggered correction. The market crash led to massive leverage liquidations, with initial estimates suggesting a figure exceeding $2 billion. This event surpassed the single-day crash records set during the COVID-19 pandemic and the FTX collapse.
Unexpected Surge in Crypto Liquidations
On Monday morning, Bybit’s co-founder and CEO, Ben Zhou, provided insights into the actual extent of recent crypto liquidations. Through a post on X, Zhou disclosed that the total liquidation numbers were substantially higher than the $2 billion initially reported.
Discrepancies in Liquidation Figures
Zhou estimated Bybit’s 24-hour liquidation value at approximately $2.1 billion, representing a significant increase from the $333 million recorded by CoinGlass. The disparity arose due to limitations in application programming interfaces (API), which restricted the accurate registration of all liquidations by CoinGlass.
Broader Implications and Future Transparency
Bybit’s CEO suggested that similar limitations might affect other exchanges, potentially increasing the total liquidation figures from the recorded $2.3 billion to between $8 billion and $10 billion. In response to user inquiries about discrepancies in reported figures during the FTX collapse, Zhou speculated that the actual liquidation value might be “at least 4-6 times” higher than reported.
Looking ahead, Zhou pledged greater transparency, committing to push all liquidation data moving forward.
Conclusion
The recent market correction highlights the crypto market’s vulnerability to global economic policies and sentiments. As traders and investors navigate this volatile landscape, transparency and accurate data reporting will be crucial in building trust and stability within the crypto ecosystem.
