The cryptocurrency market experienced a sharp downturn just before the 2025 workweek began, sending shockwaves across global financial platforms. Bitcoin briefly dipped below $92,000, triggering a massive $2.03 billion in total liquidations over the past 24 hours. Of this, $1.766 billion came from long positions, while $270 million were short liquidations. Approximately 700,594 traders were affected, with the largest single liquidation recorded on Binance—worth $25.6 million in ETHUSDT.
This sudden market correction followed a volatile period marked by geopolitical tensions, macroeconomic shifts, and technological disruptions. Below, we analyze the core factors behind the recent crypto crash, focusing on three major catalysts: the DeepSeek AI breakthrough, escalating U.S. trade tariffs under the Trump administration, and El Salvador’s reversal on Bitcoin as legal tender.
DeepSeek Sparks Market Turmoil: A Financial Black Swan?
In late January 2025, DeepSeek, a Chinese-developed large language model (LLM), surged past ChatGPT to become the top-downloaded app on the U.S. App Store. Its rise wasn’t just a tech milestone—it became a financial inflection point.
What set DeepSeek apart was its efficiency. While models like those from OpenAI required billions in investment and vast computational resources, DeepSeek achieved comparable performance at a cost of under $6 million. This challenged the prevailing "bigger is better" doctrine in artificial intelligence, shaking investor confidence in high-cost AI ventures.
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By February 2, 2025, the ripple effects hit Wall Street. NVIDIA shares dropped 5.3%, the Nasdaq fell over 400 points, and U.S. market capitalization erased nearly $1 trillion. As risk assets, Bitcoin and other cryptocurrencies followed suit—BTC declined 4.4%, and Ethereum slipped 3.8%.
ARK Invest CEO Cathie Wood commented that DeepSeek’s success proves AI innovation doesn’t require massive capital, accelerating the trend toward cost collapse in AI development. However, some U.S. officials raised national security concerns, labeling the technology a potential case of intellectual property theft and launching federal investigations.
While Bitcoin recovered slightly in the following week, market sentiment remained fragile. Analysts warn that technological disruption—especially when it undermines established investment narratives—can trigger sustained volatility in both traditional and digital asset markets.
Trump’s Tariff Policies Fuel Trade War Fears
Another key driver of the recent market selloff was the reimplementation of aggressive trade policies by the Trump administration.
On February 2, 2025, President Trump signed executive orders imposing a 25% tariff on imports from Canada and Mexico, with an additional 10% levy on Canadian energy resources. Just one day earlier, a separate order added a 10% tariff on all goods imported from China, building upon existing duties.
Trump also signaled upcoming tariffs on European Union imports, citing persistent trade imbalances and insufficient access for U.S. agricultural and automotive exports. Though no specific timeline was provided, the mere announcement intensified global trade war anxieties.
Caroline Bowler, CEO of BTC Markets, noted:
“Trump’s tariff agenda is reverberating through financial markets. Concerns over inflation, supply chain disruptions, and potential recession are spilling into crypto sentiment.”
Bitcoin briefly fell to $91,000—the lowest level in over two weeks—amid growing fears of stagflation and reduced global liquidity.
However, not all analysts see this as purely negative. Jeff Park, Alpha Strategy Lead at Bitwise, argued that protectionist policies could weaken the U.S. dollar long-term and reduce Treasury yields—both bullish signals for Bitcoin as a hedge against fiat devaluation.
Thus, while short-term market reactions were bearish, some investors view escalating trade tensions as reinforcing Bitcoin’s value proposition as decentralized, borderless money.
El Salvador Retreats on Bitcoin Legal Tender Status
Perhaps the most symbolic blow to crypto confidence came from El Salvador—the first country to adopt Bitcoin as legal tender in 2021.
On February 2, 2025, El Salvador’s legislature—controlled by President Nayib Bukele’s party—quietly passed amendments to the Bitcoin Law, effectively ending its status as mandatory legal currency. The changes were made under pressure from the International Monetary Fund (IMF), which conditioned a $1.4 billion loan on reducing Bitcoin-related fiscal risks.
Key revisions include:
- Bitcoin is no longer considered legal tender; businesses are no longer required to accept it.
- Usage becomes entirely voluntary.
- The government will no longer accept Bitcoin for tax payments.
- Six clauses of the original law were modified, and three were repealed.
Despite stepping back from enforced adoption, El Salvador continues to accumulate Bitcoin. On February 1 alone, the nation added 5 BTC to its reserves, bringing its total holdings to 6,055.18 BTC—worth approximately $618 million at current prices. Earlier purchases included 11 BTC on January 20 and ongoing infrastructure development, including plans to install Bitcoin nodes in every household—a project confirmed by presidential advisor Max Keiser.
This duality—policy retreat paired with continued accumulation—suggests a strategic recalibration rather than a full reversal.
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Frequently Asked Questions (FAQ)
Why did Bitcoin drop below $92,000?
Bitcoin’s drop was triggered by a confluence of macroeconomic factors: DeepSeek’s AI disruption affecting tech stocks, renewed U.S. tariff policies under Trump increasing recession fears, and El Salvador’s rollback of Bitcoin’s legal tender status—each contributing to risk-off sentiment.
How much was liquidated during the crypto market crash?
Over $2.03 billion in positions were liquidated within 24 hours, with longs accounting for $1.766 billion and shorts for $270 million.
Is El Salvador still buying Bitcoin?
Yes. Despite removing mandatory usage, El Salvador has continued purchasing Bitcoin and expanding its blockchain infrastructure.
Can trade wars boost Bitcoin prices?
Long-term, yes. Protectionist policies may weaken the U.S. dollar and increase inflationary pressures—conditions that historically enhance Bitcoin’s appeal as a hedge against fiat devaluation.
Was the DeepSeek AI event really a black swan?
For financial markets, yes. Its low-cost breakthrough challenged assumptions about AI investment returns, leading to significant sell-offs in high-multiple tech stocks and correlated digital assets.
What does this mean for crypto’s future?
While short-term volatility persists, these events highlight Bitcoin’s evolving role in global finance—as both a speculative asset and a potential safeguard against institutional and geopolitical instability.
Final Outlook: Volatility as a Catalyst for Maturity
The recent $2.03 billion crypto liquidation event underscores how deeply intertwined digital assets are with broader economic narratives. From AI innovation to trade policy and sovereign adoption experiments, Bitcoin is no longer moving in isolation.
Core keywords influencing this market phase include Bitcoin, crypto market crash, DeepSeek AI, Trump tariffs, El Salvador Bitcoin policy, market liquidation, risk assets, and global trade tensions—all of which reflect shifting investor priorities in an era of rapid technological and political change.
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As regulatory frameworks evolve and institutional participation grows, such volatility may become less disruptive—and more indicative of maturation. For informed investors, these dips aren’t just risks; they’re opportunities to reassess fundamentals and position strategically for the next phase of crypto adoption.
While uncertainty remains, one thing is clear: Bitcoin’s journey is increasingly shaped not by code alone—but by the complex interplay of technology, policy, and global economics.