With $1.4 billion in crypto liquidations in one day, are we just getting started — or close to bottoming out?
Tariffs rattle the global markets
As of Apr. 7, the global market environment has taken a sharp downturn, triggered by a single policy shift. On Apr. 2, President Donald Trump announced what he called “Liberation Day” tariffs — aggressive import duties that immediately shifted the tone in both equity and crypto markets.
Trump’s tariff regime has been sweeping. Imports from Canada and Mexico now face a 25% duty, while Chinese goods have been hit with an additional 34% tariff. In certain cases, products from other countries are facing combined tariffs climbing as high as 54%.
For Chinese imports, the layered effect of both new and existing tariffs means many goods are now entering the U.S. under an effective rate exceeding 54%.
The impact on the U.S. stock market was swift. By Apr. 4, the market had lost nearly $5.5 trillion in value in just two days. The S&P 500 alone shed $2.4 trillion on Apr. 3, followed by additional steep losses the next day.
In percentage terms, the Dow Jones dropped over 4,000 points, or 9.48%, the S&P 500 fell 10%, and the Nasdaq plunged 11% — all in a span of 48 hours.
Trump’s move was met with a fast response. On Apr. 4, China announced a 34% retaliatory tariff, escalating the situation and further straining market sentiment.
The resulting volatility has been felt across global markets. As of Apr. 7, total losses across major U.S. indices are estimated to be in the range of $6–7 trillion, with exact figures still being updated.
The CBOE Volatility Index (VIX), Wall Street’s “fear gauge,” surged to a multi-year high, hitting 60 by Apr. 7. This level hasn’t been seen since the height of the COVID-19 pandemic and, before that, during the 2008 financial crisis, when the VIX spiked to nearly 80.
Global markets outside the U.S. have also been hit hard. China’s Shanghai Composite dropped more than 7%, and Japan’s Nikkei fell nearly 8%. Bond markets are showing strain as well, with Treasury yields bear-flattening, 2-year yields rising, and 10-year yields falling.
The volatility hasn’t been limited to equities. The crypto market has also taken a hit, with CoinGlass data showing $1.4 billion in liquidations over the past 24 hours as of Apr. 7 — one of the highest single-day totals in recent months.
Bitcoin (BTC) fell nearly 8% to $76,500, briefly touching lows near $74,400. Ethereum (ETH) dropped 17% to the $1,500 level, with a brief dip to $1,415. Other major altcoins followed suit: Ripple (XRP) declined 16%, now trading around $1.76, while Solana (SOL) fell to around $101.
BlackRock CEO Larry Fink, in a letter to shareholders, described the current climate as one of “widespread economic anxiety,” adding that such unpredictable tariff moves have made financial planning “impossible” for businesses trying to assess global supply chains.
So, what exactly is driving this wave of sell-offs? How do experts interpret the path ahead? And how much worse could things realistically get? Let’s take a closer look.
Why is crypto down?
When tariffs rise, so do the costs of imported goods, which typically drives inflation higher, especially when those tariffs are widespread and apply to major trading partners.
Trump’s announcement, targeting multiple regions, has reignited fears of a global trade war. For investors, this shift in the economic climate changes everything.
In times of economic uncertainty, riskier assets are usually the first to be sold. This includes stocks, but also crypto. Despite being often seen as independent from traditional markets, history shows that during periods of acute stress, digital assets tend to behave more like tech stocks than safe havens.
This pattern was clearly visible in early February, when a previous round of tariffs led to $2.2 billion in crypto liquidations, pushing Bitcoin down to $92,000. Now, this pattern is repeating, but on a larger scale.
Adding complexity to the situation is the interest rate outlook. In a slowing economy, the Federal Reserve would typically be expected to cut rates. However, tariffs complicate that playbook.
Since tariffs are inflationary, they limit the Fed’s flexibility. If inflation rises, the central bank may be forced to delay expected rate cuts, or even raise rates again.
Higher rates reduce liquidity, and this tends to hurt speculative markets the most. Crypto, being one of the most liquidity-sensitive asset classes, often reacts strongly to these shifts.
This is where institutional sentiment becomes critical. According to The Kobeissi Letter, a widely followed macro newsletter, the market has entered a phase where fear is beginning to dominate.
In a post on X, Kobeissi noted that the market had “lost its orderly nature,” with assets being sold across the board — including traditional safe havens like gold, which briefly dipped below $3,000 per ounce.
Such broad-based selling often signals that the market is entering a capitulation phase, where investors are no longer making strategic decisions but are instead focused on preserving capital.
Supporting this shift in sentiment, data from March reveals that institutional capital has been rotating out of U.S. equities at the fastest pace in years, tightening liquidity across asset classes.
And as capital exits equities, it’s not flowing into crypto. Instead, it’s moving toward short-term cash instruments and defensive plays.
How much worse can it get?
The selloff we’re witnessing may not be the worst of it. If current trends persist, and retaliations escalate as expected, the global economy could be heading toward one of its toughest periods in over a decade.
Let’s begin with trade. According to Oxford Economics, if all major U.S. trade partners respond with reciprocal tariffs, global trade volumes could shrink to levels not seen since the 2008 financial crisis, excluding the COVID-19 period.
This scenario is no longer hypothetical — China has already imposed a 34% retaliatory tariff, and further responses from the EU, Japan, and other major economies are widely expected.
The Tax Foundation estimates that Trump’s full tariff plan could result in a $1.8 trillion tax increase on American consumers. This could reduce U.S. imports by $900 billion in 2025, tightening supply chains and driving up the cost of goods across multiple sectors.
Tariff rates are quickly approaching historic levels. If reciprocal policies continue, the U.S. average tariff rate could exceed 33%, nearing the Smoot-Hawley era of the 1930s — widely viewed as one of the factors that deepened the Great Depression. For context, the U.S. hasn’t seen average tariff levels above 20% since 1946.
Key sectors are already under pressure. By midday on Apr. 4, Apple and Nike had lost $470 billion in combined market value, according to The Guardian.
Boeing shares dropped 10%, as disruptions ripple through aerospace supply chains, particularly with China and Vietnam, countries now facing tariffs of 52% and 46%, respectively.
Tech, retail, and manufacturing industries that rely on global sourcing are bearing the early weight of these policy changes.
The broader macro impact is beginning to take shape. JPMorgan has warned, in comments to CNN, of a potential U.S. and global recession in 2025 if these trade measures persist.
Investor Bill Ackman captured the market’s concern in a recent post, warning that business confidence is eroding quickly. While he supports reforming global trade imbalances, Ackman cautions that a full-scale, multi-front tariff approach is damaging America’s reputation as a stable trade partner.
If Trump continues without pause, Ackman writes, the result could be a freeze in corporate investment, a collapse in consumer spending, and widespread layoffs, especially in small and mid-sized businesses that have less ability to absorb sudden cost increases.
If a global slowdown does materialize — driven by shrinking trade, rising inflation, and tighter monetary policy — capital will continue to flow out of risk assets. And crypto will likely be near the top of that list.
What’s next for Bitcoin and crypto?
There’s little disagreement that we’re currently in a high-stress macro environment. According to crypto analysts, Bitcoin may face more short-term pain, but the long-term case for its role in a fragmented global economy is growing stronger.
Jamie Coutts, a chartered market technician and crypto strategist formerly at Bloomberg, highlights that Bitcoin is testing critical levels, specifically “the top of last year’s 7-month range,” as defined by on-chain metrics like exchange volumes and URPD (UTXO Realized Price Distribution).
What makes this moment unique, Coutts explains, is that Bitcoin has become one of the only risk assets allowing macro investors to express concerns about the escalating trade war.
“When the dust settles, Bitcoin will lead as the world realizes it’s not just a store of value… It’s an asset outside the system purpose-built for trade settlement,” he said.
Coutts also cited a recent report from BlackRock, the world’s largest asset manager, which emphasized Bitcoin’s position as a “scarce, global, decentralized, non-sovereign asset.”
While BlackRock stops short of calling it a settlement currency, it acknowledges Bitcoin’s clear hedging value in portfolios exposed to geopolitical and macroeconomic risks.
Meanwhile, Michaël van de Poppe, a well-known crypto trader and analyst, believes that panic-driven price movements are not over yet.
With Bitcoin down nearly 30% from its recent highs, he expects further testing of support levels, possibly as low as $70,000, especially if there’s no delay in tariffs or if the Federal Reserve doesn’t call for an emergency policy meeting.
However, van de Poppe also views these levels as potential long-term buying opportunities: “In 12–24 months from now, you’ll be happy that you’ve bought in these areas,” he said.
Others are framing the current price drop as a setup for a broader shift in narrative. Geoffrey Kendrick, global head of digital assets research at Standard Chartered, notes that Bitcoin could evolve into a hedge against tariff-induced risks.
In a note shared with The Block, he connected the growing U.S. isolationist stance to rising concerns about fiat exposure: “U.S. isolationism is akin to increased risks of holding fiat, which will ultimately benefit Bitcoin,” Kendrick wrote.
He identified $76,500 as a critical support level, marking the high from the day after the U.S. election, and emphasized Bitcoin’s relative strength compared to major tech stocks, aside from Microsoft and Google.
All in all, while short-term volatility may persist, especially with tariff escalations shaping rate expectations and capital flows, the long-term thesis for Bitcoin is gaining traction.
However, caution is still warranted. If tariffs expand further or inflation accelerates, Bitcoin could face renewed pressure alongside broader markets. The market remains highly volatile, so it’s important to trade wisely and never invest more than you can afford to lose.
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