Panic Among Investors: Why Is the Crypto Market Erasing $760 Billion in Market Capitalization

The crypto market declined after Bitcoin’s price dropped to $92,000 due to new tariffs imposed by U.S. President Donald Trump on China, Mexico, and Canada. The cryptocurrency market suffered a significant drop today, with losses amounting to billions. The total market capitalization of cryptocurrencies decreased by 9.7% in the last 24 hours to $3.07 trillion on February 3, marking the lowest level since November 2024.

“The crypto market is known for its volatility, but several specific factors contributed to the recent decline, including:

U.S. Tariffs: Trump’s trade wars shake the market.
Mass liquidations wiped out over $700 billion from the crypto market capitalization.
Trump’s tariffs suppress bullish sentiment.

The latest executive order by U.S. President Donald Trump imposed tariffs that shook global markets, including cryptocurrencies.

What you need to know: On February 1, President Trump signed an executive order imposing a 25% tariff on imports from Canada and Mexico. He also imposed a 10% tariff on Canadian energy and oil, as well as a 10% tariff on China. The tariffs will take effect on Tuesday, February 4. In response, Mexican President Claudia Sheinbaum announced retaliatory tariffs and non-tariff measures. Canadian Prime Minister Justin Trudeau stated on Saturday evening that Canada would impose a 25% tariff on some U.S. goods.

Related: Ether and altcoins are down double digits as Trump’s tariffs hit harder.

Cryptocurrencies, often considered high-risk investments, are particularly sensitive to such political changes. The prospect of a trade war led to a sell-off in crypto assets as investors sought to reduce risk. Ethereum (ETH) plummeted 16% in the last 24 hours to $2,589. XRP lost 16.4%, trading at $2.40.”

“BNB Chain (BNB), Dogecoin (DOGE), Cardano (ADA), Tron (TRX), as well as other leading altcoins, have plummeted by over 10% in the last 24 hours.

Over $2.25 billion in liquidations in the crypto market:

The crypto market is undergoing massive liquidations in the last 24 hours following the announcement of tariffs by U.S. President Donald Trump. More than $2.25 billion worth of crypto positions were liquidated in the past 24 hours. Nearly $1.87 billion of that amount was from long positions. This was one of the largest liquidation events in the history of the crypto space, surpassing both the market crash during COVID-19 and the events surrounding FTX.”

Over 738,000 traders were liquidated in the past day, with the largest individual liquidations occurring on Binance, related to ETH/BTC positions worth $25.6 million. Such a scale of liquidations worsens the price decline and creates fear among other market participants, leading to further pressure on the price.

Low margin requirements in the crypto market mean that even small market movements can trigger these massive sell-offs, significantly affecting asset prices. Although today’s liquidation is considered “one of the largest in history,” some of the historical events it is compared to had a “greater effect,” according to the NFT Museum.

The Terra-Luna fiasco and the collapse of FTX each led to $1.6 billion in liquidations. The market crash during COVID-19 resulted in over $2.9 billion in liquidations on the derivatives markets.

Over $700 billion wiped off the crypto market:

The crypto market is experiencing a sharp decline, having lost billions from its market capitalization, according to data from Cointelegraph Markets Pro and TradingView. The total market capitalization of all cryptocurrencies decreased by over 21%, from $3.57 trillion on January 31 to a local low of $2.81 trillion. This marks a loss of over $700 billion in a span of four days. The crypto market is down 17% from its all-time high of $3.73 trillion, reached on December 17, 2024.

The market crash also led to a break below key support levels for TOTAL (the total market capitalization of the crypto market), provided by the 50-day and 100-day simple moving averages (SMA) at $3.36 trillion and $3.18 trillion, respectively. The daily RSI dropped to 33 on February 3, which intensifies the downward movement but is close to the ‘oversold’ threshold of 30.

Sellers are now focusing their attention on today’s low of $2.81 trillion or the demand zone at $3.18 trillion, supported by the 200-day SMA. It’s worth noting that this moving average has been a dynamic support level for TOTAL since October 14, 2024. Buyers will try to push the crypto market capitalization back above the 100-day SMA, with the next key level to watch being the 50-day SMA at $3.36 trillion.