Bitcoin dropped to $93,000 after news of proposed EU tariffs emerged, while gold and silver reached record highs, indicating strong safe-haven demand. Concurrently, nearly $800 million in leveraged crypto long positions were liquidated, underscoring a growing trend of risk aversion among traders. Despite these events, cryptocurrency volatility remained muted, suggesting that traders anticipate no significant price swings until clearer macroeconomic signals emerge.
Market Reaction to Geopolitical Developments
Crypto investors experienced a tense weekend as President Donald Trump linked proposed tariffs on several EU countries and the UK to a potential U.S. purchase of Greenland. With U.S. equity markets closed, futures trading served as the initial indicator for traditional markets to price in this development. Over the weekend, tokenized stocks showed minimal movement as investors adopted a cautious stance, lacking clear market guidance. The cryptocurrency market, often an early indicator for significant economic or political news, also remained within a tight range, with major coins showing little change. Thin trading volumes made it challenging to gauge the market's true sentiment.
Bitcoin and the broader crypto market faced additional pressure on Monday following reports that the European Union was preparing retaliatory tariffs valued at €93 billion ($110 billion). This development led to a decline in European equities and a downturn in U.S. futures, while safe-haven assets like gold and silver surged to record highs. However, Bitcoin did not mirror the upward trend of precious metals, trading at $93,000 after a 2.5% decrease since 23:00 UTC on Sunday. Altcoins displayed mixed performance, with the CoinDesk 80 Index (CD80) down 4.64% over 24 hours, though it still outperformed the bitcoin-heavy CoinDesk 20 (CD20), which fell by 2.5%.
Crypto Liquidations and Risk Aversion Surge
Bitcoin slipped below the $94,500 support level after a brief breakout on Wednesday, raising concerns about a potential return to its mid-November range of $85,000–$94,500. This market pullback resulted in the liquidation of nearly $800 million in leveraged long positions within a 24-hour period, highlighting the impact of margin shortfalls. The total notional open interest (OI) in crypto futures decreased by over 2% to $138.14 billion. While Bitcoin's OI saw a slight increase and Ethereum's remained flat, other major tokens such as SOL, XRP, ADA, DOGE, SUI, and LTC experienced declines ranging from 8% to 13%. This indicates significant capital outflows and a rise in risk aversion among market participants.
Volatility and Trader Sentiment Remain Muted
Despite the market jitters, the expected 30-day price swings for Bitcoin and Ethereum remained steady. This suggests that traders do not anticipate significant price movements in the near future. The disparity in BTC options hints at continued concern regarding potential price drops. Traders are proceeding with caution, hedging their positions carefully and awaiting clearer economic or global signals before committing to substantial investments.