Trump threatens Europe with retaliation escalation: How will US-Europe conflict impact the crypto market

Trump’s threat against Europe escalates once again. On January 22, he explicitly stated that if Europe sells off U.S. bonds and other assets, it will face large-scale retaliation. This stance contrasts with recent firm responses from German Finance Minister Christian Lindner, as the trade conflict between the two major economies has expanded from tariffs to financial assets, with market volatility and risks intensifying.

The Three Stages of US-Europe Conflict Escalation

From Tariffs to Financial Assets

According to the latest reports, the conflict between the US and Europe has undergone a clear escalation process. The high tariff policies implemented by the Trump administration are the starting point, but the scope of threats has now expanded into the financial sector. If Europe truly sells off U.S. bonds, it would directly threaten the dollar’s status as the world’s primary reserve currency, which explains why Trump’s threats are so forceful.

German Finance Minister Lindner’s response is equally clear. He stated, “There are limits to everything, and that limit has now been reached,” listing possible European countermeasures, including tariffs on American goods, selling U.S. bonds, and restricting American tech giants. This indicates that Europe is prepared to respond.

Why Financial Assets Have Become the New Battlefield

U.S. debt is one of the most important reserve assets globally. The European Central Bank and European countries hold large amounts of U.S. debt, which is not only a financial asset but also a crucial part of the international financial system. Trump’s threat to sell off U.S. bonds reflects his extreme sensitivity to the dollar’s position. Europe’s use of U.S. bonds as a countermeasure also underscores the strategic importance of this asset.

The Market Is Already Reacting

Clearing Risks and Increased Volatility

According to the latest data, the total market liquidation amount in mid-January approached $900 million, demonstrating how geopolitical tensions are directly driving up market risks. Specific cryptocurrencies face more concrete liquidation risks:

• XRP is currently trading around $1.95; if it rebounds to $2.29, it could face over $600 million in potential short liquidations
• AXS has risen over 120% this year, but increasing exchange deposits suggest potential selling pressure
• DUSK’s price has increased nearly sixfold, but if it retraces below $0.13, it could face significant long liquidations

These figures reflect the high-stress state of the market amid geopolitical uncertainty.

Contradictions in the Crypto Market

Interestingly, Trump’s attitude toward cryptocurrencies has remained relatively friendly. The White House has confirmed plans to cancel taxes on Bitcoin and other crypto transactions, and according to Bloomberg, crypto assets account for over 20% of Trump’s family wealth of $6.8 billion. This should provide support for the crypto market.

However, the current issue is that the escalating US-Europe conflict and the resulting global economic uncertainty are overshadowing these positive factors. The market’s reaction to geopolitical risks is one of panic rather than optimism.

Possible Future Developments

Based on the current situation, several directions warrant attention:

• US-Europe Negotiations: Trump has announced plans to meet with “various parties” in Switzerland, which could be an opportunity to de-escalate, or merely a tactical move
• Market Response: If negotiations stall and Europe actually sells off U.S. bonds, it could trigger a chain reaction in global financial markets, with cryptocurrencies as risk assets being the first to react
• Policy Implementation: Whether Trump’s crypto-friendly policies can continue amid geopolitical conflicts remains uncertain

Summary

Trump’s latest threat signals a shift of the US-Europe conflict from trade to financial assets, a more dangerous development. Markets are already reacting, with liquidation risks rising sharply. Although the Trump administration has shown support for cryptocurrencies, these policy benefits are significantly weakened by global economic uncertainties. Whether the US and Europe can resolve their differences in the coming week will directly influence market trends. Current high volatility and liquidation risks serve as a warning for investors to manage their positions cautiously.