Tariff Concerns Drive Bitcoin to $88,000: Crypto Markets Prepare to Test Critical Price Levels

Cryptocurrency markets have been shaken recently by rising tariff concerns. Bitcoin has declined by approximately 2.5% since Sunday, falling back to the $88,000 level, which is below the critical support level of $94,500. During the same period, altcoins have shown mixed performance, with investors favoring diverging strategies. This volatile movement in the market has caused significant shifts not only in prices but also in derivative positions and investor sentiment.

Trump’s Tariff Decision and Its Market Impact

The announcement of a €93 billion tariff preparation by the European Union, retaliating against U.S. President Donald Trump’s threats regarding Greenland, caused fluctuations in the crypto markets on Monday. Following this news, Bitcoin began to decline, and heavy selling pressure emerged among tokens in the altcoin category. The CoinDesk 80 Index fell by 4.64% in the last 24 hours, while the Bitcoin-weighted CoinDesk 20 Index lost 2.5%. Since midnight, a noticeable divergence has appeared among the indices: the CoinDesk 20 has only declined by 0.93%, whereas DeFi and layer-1 tokens are facing losses exceeding 10%.

This policy-driven uncertainty has not only affected the crypto market. European stock markets also declined, and U.S. futures were under pressure. Conversely, safe-haven assets like gold and silver reached record levels. Despite Bitcoin’s narrative as a “risk asset,” investors seeking value preservation preferred physical precious metals over digital assets.

Derivative Position Losses and Liquidity Dynamics

This pullback in the crypto market has hit long positions using borrowed funds hard due to margin insufficiency. Approximately $815 million worth of leveraged positions were forcibly liquidated in the last 24 hours, with $231 million related to Bitcoin. The wave of liquidations has pushed away bullish leverage in the market, and open positions on derivative exchanges have begun to shrink.

The total nominal open interest (OI) in crypto futures has decreased by over 2%, now standing at $138.14 billion. Bitcoin’s open interest increased by 0.65% in 24 hours, while Ethereum remained flat. Meanwhile, major tokens like SOL, XRP, ADA, DOGE, SUI, and LTC experienced losses between 8% and 13%, indicating risk aversion and large-scale capital outflows.

However, the 30-day implied volatility for Bitcoin and Ethereum has not shown a significant increase. This suggests that investors do not have strong expectations of rapid price movements in the short term. The Bitcoin call-put volatility spread on Deribit options remains negative as time progresses, indicating ongoing market anxiety. A similar pattern is observed for Ethereum, with investors tending to expect more downward movement in the near term.

Diverging Altcoin Market Performance and Liquidity Issues

Since midnight, the altcoin market has exhibited heterogeneous movements. Lighter’s LIT token continued its decline on Monday, losing 10% since the end of Sunday. These declines coincide with the period when HyperLiquid’s trading volume topped the derivative exchange listings, reflecting decreased interest in the Lighter platform after the December air drop.

Meanwhile, Monero (XMR) moved in a different direction from Bitcoin, gaining over 13% since 23:00 UTC. Privacy coins have maintained an upward trend since the beginning of the year. However, DeFi tokens like ETHFI, ENA, and JUP experienced double-digit losses overnight, and layer-1 networks APT and SUI also lost around 10% in value.

This situation is more dramatic for tokens with medium market capitalization. The chronic liquidity shortage following the October liquidation chain has caused lower performance in this category. Solana (SOL) and Cardano (ADA) suffered approximately 6% losses, unable to escape the downward pressure of the overall crypto market.

Safe-Haven Assets: Comparing Gold and Bitcoin

An interesting divergence occurred amid the tariff-related sell-off. Gold rose above $5,500 per ounce, creating a busy trading atmosphere with a nominal value of about $1.6 trillion in a single day. JM Bullion’s Gold Fear and Greed Index, while bearish in the crypto market, signals excessive optimism in precious metals.

Despite Bitcoin’s narrative as a “risk asset,” physical gold and silver remain the preferred stores of value for investors seeking safety. The preference for precious metals over digital tokens clearly indicates how investors perceive risk. Additionally, Bitcoin, as a risk asset, is traded more actively, reflecting institutional funds’ search for protection during macroeconomic uncertainties.