Why is crypto down？

The cryptocurrency market experienced a significant decline in the past week, with Bitcoin skyrocketing and plummeting in the past 24 hours. The main reason for this decline in the crypto market is attributed to the recent tariff policies implemented by the Trump administration. The U.S. government under the leadership of President Trump announced a 25% tariff on imports from Canada and Mexico, as well as an additional 10% tariff on Canadian energy resources. These measures have caused shockwaves in global markets, including the crypto asset sector.

Trump’s tariff policy impacts not only North America. The government also expressed its intention to impose new tariffs on the European Union, citing concerns about trade imbalances in the automotive and agricultural sectors. This escalating trade tension has created an atmosphere of uncertainty, prompting investors to reassess their risk exposure across various asset classes, including Crypto Assets.

Crypto community KOL Caroline Bowler emphasized the far-reaching impact of these trade policies, stating “Trump’s tariff policy is affecting the entire market, and concerns about the recession caused by the trade war and stagflation are spreading in the altcoin and bitcoin markets”. This view reflects the interconnectedness of the global financial and the vulnerability of cryptocurrencies to macroeconomic factors.

However, not all analysts see tariffs as entirely negative for the crypto market. Jeff Park, Head of Bitwise Alpha Strategy, believes that Trump’s trade tariff policy may have a positive impact in the long term. Bitcoin price He believes that these measures could weaken the US dollar in the global currency market and lower US Treasury yields. This view underscores the complex relationship between geopolitical events and the valuation of crypto assets.

DeepSeek AI shakes the technology industry, triggering market sell-off

While the trade tensions have played a significant role in the recent downturn in the crypto market, another potential ‘black swan’ event has emerged: the rise of DeepSeek AI. On January 27, 2025, this AI model developed in China surpassed ChatGPT in the download rankings on the US App Store, attracting global attention from the technology, investment, and media sectors.

The remarkable feature of DeepSeek lies in its cost-effectiveness. Despite its performance being comparable to high-end models like OpenAI, the training cost of DeepSeek is rumored to be less than $6 million. This discovery has shaken the foundation of the AI industry and challenged the widespread belief in the necessity of substantial investment.

The market’s reaction to the emergence of DeepSeek was rapid and severe. On February 2, 2025, NVIDIA’s stock value dropped by 5.3%, and the NASDAQ index fell by over 400 points. The total market value of the US stock market lost nearly one trillion dollars. As crypto assets are usually considered risky assets, they also did not escape the turbulence in the tech industry. Bitcoin and Ethereum dropped by 4.4% and 3.8% respectively on the same day.

This event highlights the intricate relationship between technological progress, market sentiment, and the valuation of crypto assets. The DeepSeek phenomenon illustrates how innovation in a field can trigger the entire financial eco, including the chain reaction in the crypto market.

Crypto liquidations exacerbated market declines

The recent downturn in the encryption market has been exacerbated by a wave of liquidation on trading platforms. In the past 24 hours, the market has experienced a total of $2.028 billion in liquidation, with long positions accounting for $1.676 billion and short positions for $0.27 billion. This significant liquidation event has further intensified the downward pressure on cryptocurrency prices.

These numbers underscore the volatility and leverage in the Crypto Assets market. The domino effect of liquidation could lead to rapid price declines, as forced selling would exert additional pressure on an already tense market.

This liquidation event is particularly severe for Bitcoin, which briefly fell below $80,000, marking its lowest point in three months. This sharp decline has sent shockwaves throughout the entire cryptocurrency eco, affecting altcoins and DeFi projects.

Gate.io traders and investors should remain vigilant in this highly volatile period. Implementing appropriate risk management strategies and avoiding excessive leverage can help mitigate the impact of sudden market fluctuations and potential liquidation.

El Salvador’s Bitcoin law reversed: a blow to the adoption of crypto assets?

In a surprising turn of events, El Salvador, once hailed as a pioneer in the adoption of crypto assets, has decided to amend its Bitcoin law. On February 2, 2025, the Salvadoran Congress quietly passed an amendment to the Bitcoin law, effectively removing Bitcoin as the country’s legal tender.

This decision marks a significant shift in El Salvador’s attitude towards BTC after becoming the first country to adopt Bitcoin as its official currency in 2021. The amendment modifies six articles and repeals three articles in the original law, with several key implications: the use of Bitcoin is now voluntary; merchants are not obliged to accept Bitcoin; and Bitcoin is no longer accepted for tax purposes.

This reversal comes after nearly two years of pressure from the International Monetary Fund (IMF), which tied the approval of a $1.4 billion loan to El Salvador to ‘mitigating the risks of Bitcoin.’ This development highlights the ongoing tension between the adoption of crypto assets and traditional financial institutions.

Despite this setback, on-chain data shows that El Salvador continues to accumulate Bitcoin. On February 1, 2025, the country added 5 more Bitcoins, bringing its total holdings to 6055.18, valued at 620 million U.S. dollars. This continued investment indicates that despite the change in legal status of Bitcoin, the government’s interest in this crypto asset has not diminished completely.

The situation in El Salvador reminds us of the complex interactions between national policies, international financial institutions, and the global crypto asset market. With the development of the encryption environment, investors and enthusiasts should closely monitor these regulatory dynamics and their potential impact on market dynamics.

Conclusion

The recent turmoil in the encryption market highlights its sensitivity to global economic changes and technological disruptions. Trump’s tariffs, the emergence of DeepSeek AI, and El Salvador’s policy reversal have reshaped the landscape. With the intensification of a $2 billion liquidation causing market fluctuations, investors must navigate through a complex interplay of factors. The resilience of the crypto world is being tested, challenging stakeholders to quickly adapt to the evolving financial eco.

Risk Warning: Unforeseen geopolitical events or regulatory changes may further disrupt the crypto market, potentially leading to more severe price fluctuations and liquidity issues.