Why Is Crypto Crashing Today? $400B Bloodbath Triggers Panic
Mustafa Mulla3 Feb 20254 min read
The crypto market is in freefall, losing over $400 billion in just 24 hours. Major players like Bitcoin, Ethereum, XRP, and Dogecoin have all taken heavy hits, some falling by nearly 20%.
But what’s behind this sudden crash? A mix of global events and shifting market dynamics are shaking things up, and the fallout is being felt across the board. Let’s take a closer look at what’s causing this turmoil.
Trade War Sparks Market Panic
One of the main reasons behind the market drop is the recent trade war triggered by U.S. President Donald Trump Donald Trump Donald J. Trump is a US-based business tycoon, pro-crypto politician, and 47th (present) President of the United States. He comprehends the significance and needs of the modern fintech world, and people look up to him as a dominant pro-crypto politician. Once doubtful about Bitcoin's dominance, he said in a tweet in 2019, “I am not a fan of Bitcoin", but now has a significant amount of cryptocurrency holdings in his pool. He has also signed an Executive Order to establish a Strategic Bitcoin Reserve, which highlights his commitment to the future of cryptocurrency. Quick Facts Full name Donald John Trump Birth 14-06-1946, New York, United States Nationality American Education BS from the University of Pennsylvania Famous For Business, Politics Donald Trump - Career Highlights & Events 2016 – Elected as the 45th President of the United States from the Republican Party. 2017 – Signed the Tax Cuts and Jobs Act, impacting investment environments 2019 – Slammed crypto king Bitcoin on X, calls it "not money". 2025 – A gala party was hosted by him for the top 220 Trump meme coin holders. President By declaring a national emergency under the 1977 International Emergency Economic Powers Act (IEEPA), Trump imposed heavy tariff rules—25% on Mexico and Canada, and 10% on Chinese imports.
This move caused immediate panic, with fears of rising prices, inflation, and economic instability. U.S. stock indexes dropped sharply, pulling the crypto market down with them.
Bitcoin Network Activity Slows Down
Aside from external economic factors, Bitcoin’s network activity has declined significantly. Data from CryptoQuant shows that the mempool is nearly empty. This means fewer transactions are taking place, which is unusual for Bitcoin.
Additionally, Bitcoin transaction fees have fallen to just 1 sat/vB, signaling low demand for block space. This is the lowest level of activity recorded since March 2024.
Crypto Liquidations Surge
The market has also seen a wave of liquidations, with over $2.18 billion worth of crypto positions being wiped out in a day, affecting more than 715,000 traders.
Long traders suffered the most, losing $1.85 billion, while short traders lost around $334 million. The largest single liquidation happened on Binance, where one trader lost $25.64 million in a single trade.
Stronger U.S. Dollar Adds Pressure
Another factor weighing down Bitcoin is the strengthening U.S. dollar. The U.S. Dollar Index (DXY) has surged to 108.50, while the 10-year Treasury yield has risen above 4.54%.
Historically, Bitcoin moves in the opposite direction of the dollar and Treasury yields, meaning a stronger dollar often leads to lower BTC prices.
Bitcoin Struggles to Hold Key Support Level
Currently, Bitcoin is struggling to stay above $93,000. If it drops below the key support level of $90,000, analysts warn that further declines could follow. Meanwhile, the Crypto Fear & Greed Index has dropped to 38, shifting from Neutral to Fear.
While the market is under pressure, Bitcoin’s future isn’t entirely bleak. If Bitcoin can break above $95,000, it may regain its bullish momentum. But for now, the market remains uncertain, and investors are watching closely to see what happens next.
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FAQs
- The market is crashing due to a trade war, a slowing Bitcoin network, increased liquidations, and a stronger U.S. dollar.
