In the past 48 hours, the cryptocurrency market has experienced a significant downturn, with approximately $1.8 billion being liquidated as Bitcoin erased its gains for 2026. This sharp correction has rattled investors and triggered widespread discussion about the factors influencing this volatility.
Bitcoin's price plummeted from a high of around $97,500, wiping out much of its gains for the year, to trading just under $90,000. The initial trigger for this downturn appears to be President Trump's threat to impose tariffs on European nations. This announcement on Saturday, which included a 10% tariff starting February 1 and escalating to 25% by June 1 if a deal regarding the U.S. acquisition of Greenland isn't reached, sent shockwaves through global markets.
The tariffs are in response to the European nations' resistance to Washington's Greenland takeover plans. Trump cited national security and the "Golden Dome" defense system as justification for acquiring Greenland. The affected countries, including the UK, Denmark, Norway, Sweden, France, Germany, and the Netherlands, responded with a joint statement condemning the tariff threats and warning of a "dangerous downward spiral" in transatlantic relations.
This geopolitical uncertainty has led investors to seek safe-haven assets. Gold, for example, has seen a surge, reaching over $4,750 an ounce. The US stock market also experienced a significant drop, erasing its year-to-date gains as investors grappled with the potential implications of a full-blown trade war.
The Bitcoin sell-off underscores its sensitivity to geopolitical events. Instead of acting as a safe-haven, Bitcoin moved in tandem with the broader market, increasing its correlation with risk assets. Data indicates that over 90% of the $790 million in liquidations were "long" positions, suggesting a technical flush-out of over-leveraged buyers rather than a fundamental shift in Bitcoin's value proposition.
Despite the price drop, on-chain metrics suggest institutional investors used the dip as a buying opportunity. Spot Bitcoin ETFs recorded net inflows of over $1.42 billion during the downturn, indicating long-term fund managers were actively buying around the $92,000 support level. This "institutional absorption" may provide a floor for Bitcoin's price.
Technically, Bitcoin's profile has shifted to a bearish stance. The 14-day relative strength index (RSI) has dropped sharply, suggesting the cryptocurrency may be entering oversold territory, although downward momentum remains strong. The daily chart shows a bearish crossover, with the moving average convergence divergence (MACD) line trending well below the signal line. While some analysts suggest the oversold RSI could present a "dip-buying" opportunity, the immediate outlook remains bearish as long as the price stays below $94,000.
