Risk-on assets? Trump tariffs lead to mass Bitcoin, crypto liquidations

US President Donald Trump has introduced tariffs on major trading partners Canada, Mexico and China, sending markets crashing and painting a doubtful picture for crypto markets.

Bitcoin (BTC) slumped below $100,000 on Feb. 2, while altcoins like XRP (XRP) and Cardano’s ADA (ADA) are down over 17% and 22%, respectively, as of the time of writing. Trump’s own World Liberty Financial portfolio suffered losses of over 20%, according to Spot on Chain. 

The total market liquidation is estimated to be “at least around $8 billion – 10 billion,” according to Bybit co-founder and CEO Ben Zhou. Responding to a Cointelegraph post on X, the crypto exchange executive said:

“Bybit’s 24hr liquidation alone was $2.1 billion.”

• On Feb. 1, Trump placed a 25% additional import tariff on Mexico and Canada and 10% on China.

• Markets went spiraling, with major stock indexes and crypto seeing losses across the board.

• Trump stated he plans to introduce tariffs on the EU — as well as superconductors, oil, gas, steel and copper — as soon as Feb. 18.

While many are saying investors should buy the dip, some analysts are noting the increasing correlation between crypto and traditional markets, stating that the incoming tariffs could send Bitcoin tumbling further and increase market uncertainty.

Further tariffs likely to affect Bitcoin price

As Bitcoin adoption grows, the role of the asset has changed. Traders, investors and enthusiasts still debate whether Bitcoin is ultimately a risk-on or risk-off asset. The price of risk on assets is driven by factors such as earnings, market sentiment, bank policies and speculation, while risk-off assets serve as safe havens during times of market uncertainty.

With the effect the tariffs have had on crypto markets, many analysts are now firmly in the camp that Bitcoin is — at the moment — a risk-on asset and that further market turbulence will likely negatively affect BTC price. 

Crypto and finance influencer Amit Kukreja said, “Unfortunately, crypto is not a safe haven. Bitcoin trades on liquidity and global liquidity DECREASES with tariffs.”

Economist and trader Alex Krüger posted on Feb. 3 on X, “Bitcoin is mainly a risk asset. Tariffs this aggressive are very negative for risk assets. And the economy will take a hit.”

According to Krüger, the best hope is that retaliations from countries targeted by US tariffs aren’t too high and “that the US and other countries find common ground fast so tariffs may be pared back fast, and soon.”

The prospect of reconciliation seems especially far away given that as Trump signed the order, he said the US was not seeking any concessions from Canada, Mexico or China. He told reporters on Feb. 2:

“If they want to play the game, I don’t mind. We can play the game all they want.”

His comments regarding tariffs on the EU, and possibly the UK, were not particularly conciliatory either.

“[The] UK is out of line, but I think that one can be worked out. But the European Union, it’s an atrocity what they’ve done.”

Bitcoin price to rise “violently,” for “we are at war”

Other market observers are unfazed by the market’s recent dip and believe the conditions currently putting downward pressure on Bitcoin could soon create a meteoric rise. Over the weekend, analysts and Crypto Twitter degens repeated the old adage that investors should “buy the dip” in anticipation of further gains. 

Related: Bitcoin bottoms at $91.5K on global trade war fears, highlighting economic concerns

Bitwise’s European head of research, André Dragosch, said on Feb. 3 that there were “big declines in sentiment & positioning across the board” and that it’s a “good time to start adding exposure in Bitcoin imo.”

Later the same day, he said accumulations were already starting to pick up:

Jeff Park, head of alpha strategies at Bitwise Invest, predicted that “as the financial war unravels,” the price of Bitcoin will go “violently higher.”

Despite the unclear end goal of Trump’s tariffs, Park argued they are ultimately intended to “seek a multi-lateral agreement to weaken the dollar, essentially a Plaza Accord 2.0.” 

According to Park, Trump is also seeking lower yields on 10-year Treasurys, which, combined with inflation, will create demand for risk assets like Bitcoin.

“So while both sides of the trade imbalance equation will want Bitcoin for two different reasons, the end result is the same: higher, violently faster—for we are at war.”

Krüger, who was far less optimistic in his prognosis, said factors like a likely upcoming tax cut and the likely deregulation of the crypto industry in the US do provide a significant upside for Bitcoin.

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Still, the situation remains “very murky,” he said, concluding: “I still don’t think the cycle top is in, and expect equity indices to print ATHs later in the year. But the probability of being wrong has increased. Particularly on the latter. As I said a week ago, I’ve taken my long-term hat off. This is a traders’ market.” 

Trump’s World Liberty Financial not spared from market sell-off

Whether crypto investors become disillusioned with Trump as the “crypto president” or double down in anticipation of a higher Bitcoin all-time high, it’s clear that Trump’s near-term economic strategies could weaken the economy.

Trump himself said there would be “some pain” for Americans from the tariffs, but he brushed it off, saying that “people understand that. But long term, the United States has been ripped off by virtually every country in the world.”

Indeed, Trump himself could be feeling “some pain.” His family’s decentralized finance protocol, World Liberty Financial, went on an altcoin buying spree just hours before his inauguration on Jan. 20. The investments, which totaled over $270 million earlier this week, reportedly fell by over 21%, or $51.7 million, on Feb. 2.

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