Markets Reel as Bitcoin Drops 6.8%, 720,000 Crypto Positions Liquidated Amid Global Trade Tensions

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The global financial landscape experienced a sharp downturn on February 3, as geopolitical tensions and macroeconomic fears triggered a broad selloff across equities, crypto, and futures markets. Bitcoin plunged over 6.8%, briefly dipping below $91,130, while Ethereum suffered a staggering 25% intraday drop — its worst single-day performance in months. The turmoil extended beyond digital assets, with Japan’s Nikkei 225 shedding more than 1,000 points and U.S. index futures tumbling at the open.

Crypto Market Collapse: $2.21 Billion in Liquidations

According to CoinGlass data, the past 24 hours saw a devastating wave of margin calls across cryptocurrency markets. A total of 720,000 traders were liquidated, with combined losses reaching **$2.21 billion**. Long positions bore the brunt of the carnage, accounting for $1.87 billion in forced exits — roughly 85% of total liquidations.

Bitcoin, which had traded above $106,000 just days earlier on January 31, has now entered a correction phase, declining for four consecutive trading sessions. At press time, BTC was changing hands near $92,899, down 6.83% from its recent peak.

Ethereum led the altcoin selloff, dropping to a low of $2,080.19, its weakest level in nearly a year. Other major digital assets followed suit:

The largest single liquidation occurred on Binance involving an Ethereum futures contract valued at $25.6 million, underscoring the extreme leverage present in the market ahead of the crash.

👉 Discover how top traders manage risk during volatile market swings.

Trade War Fears Spark Market Panic

Market analysts point to escalating U.S. trade policy rhetoric as a primary catalyst behind the sell-off. On February 2, former President Donald Trump announced plans to impose 25% tariffs on imports from Canada and Mexico, reigniting concerns about a global trade war.

In response:

The coordinated backlash heightened investor anxiety over supply chain disruptions and inflationary pressures. As global trade tensions flared, markets began pricing in slower growth and potential stagflation — conditions historically hostile to risk assets.

“Trump’s tariff talk is reverberating across all markets,” said Carolyn Bowler, CEO of BTC Markets. “Fears of a trade war and economic stagnation are spreading fast — and now even Bitcoin isn’t immune.”

While Trump is not currently in office, his influence on Republican economic policy remains strong, and his statements continue to move markets ahead of the 2025 U.S. election cycle.

Bitcoin’s Legal Status in El Salvador Undermined

Compounding bearish sentiment was news from El Salvador, once hailed as a pioneer in national crypto adoption.

According to The National (Spain), El Salvador quietly amended its Bitcoin Law through legislation passed by the ruling party-controlled legislature. The reform废除 three key provisions and modified six others, effectively ending Bitcoin’s mandatory status as legal tender.

Key changes include:

This shift comes after nearly two years of pressure from the International Monetary Fund (IMF), which made de-emphasizing Bitcoin a condition for approving a $1.4 billion loan package to President Nayib Bukele’s government.

Public sentiment had long been skeptical: polls show 71% of Salvadorans opposed making Bitcoin legal tender when it was first adopted in September 2021. By late 2022, 91.7% reported no improvement — or worsening — financial conditions since the rollout.

Once marketed globally as the “Bitcoin Republic,” El Salvador’s reversal sends a sobering message about the challenges of integrating volatile digital assets into national economies.

👉 Explore how regulatory shifts impact crypto investment strategies.

Global Equity Markets Tumble

The ripple effects reached traditional financial markets with full force.

Japan’s Nikkei 225 plunged over 1,000 points, closing down 2.7%. The broader Topix index dropped 2.4%. Key exporters were hit hard:

South Korea’s KOSPI index fell 2.54%, closing at 2,453.33 after losing 64 points.

U.S. futures followed suit:

Hong Kong markets showed initial weakness but recovered late in the session:

Notably, Alibaba-W surged more than 5% during early trading, hitting a recent high after Alibaba Cloud announced price cuts for its Qwen-max AI model series — including input/output and batch processing rates.

The WIND Hong Kong Semiconductor Index jumped over 7% in morning trading, signaling strength in tech infrastructure despite broader market jitters.

FAQ: Understanding the Market Downturn

Why did Bitcoin drop so sharply?

Bitcoin’s decline was driven by macroeconomic fears tied to renewed U.S. tariff threats, which sparked a broad retreat from risk assets. Additionally, El Salvador’s rollback of Bitcoin as legal tender weakened confidence in institutional adoption narratives.

How many people lost money in this crash?

Over 720,000 traders were liquidated within 24 hours, with total losses reaching $2.21 billion, primarily among leveraged long positions.

Is this similar to previous crypto crashes?

While not as severe as the 2022 Terra or FTX collapses, this event stands out due to its macro-driven nature — unlike past crashes rooted in internal ecosystem failures. It highlights how crypto is increasingly sensitive to global economic signals.

What does El Salvador’s policy change mean for crypto?

It shows that even pro-crypto governments may reverse course under international financial pressure. The move underscores that regulatory risk remains high for national-level crypto experiments.

Could this affect long-term crypto adoption?

Short-term sentiment is dampened, but structural adoption — such as spot ETFs and institutional custody — continues to grow. Regulatory clarity and macro stability will be key drivers going forward.

How can investors protect themselves during volatility?

Diversification, avoiding excessive leverage, and using risk management tools like stop-loss orders are essential. Platforms offering advanced trading safeguards can help mitigate sudden downside risks.

👉 Learn how to build resilient portfolios in uncertain markets.

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Final Thoughts

The events of February 3 serve as a stark reminder that cryptocurrency markets are no longer isolated from traditional finance — they react swiftly to macro headlines, policy shifts, and geopolitical developments. With trade tensions resurfacing and regulatory landscapes evolving, investors must remain vigilant.

While short-term pain is evident — especially for leveraged traders — such corrections often lay the groundwork for healthier long-term growth. As adoption matures and infrastructure strengthens, resilience against external shocks will improve.

For now, the focus turns to central bank responses, upcoming economic data, and whether political rhetoric escalates into actual policy changes — all of which will shape the next phase of global market direction.