• Over $2.2 billion in leveraged cryptocurrency positions were liquidated following the announcement of new U.S. tariffs.
• Bitcoin and Ethereum experienced significant price declines, with Ethereum dropping 20% in 24 hours.
• Analysts caution against reactive trading strategies, emphasizing the importance of patience during periods of heightened volatility.

The cryptocurrency market encountered a major market decline on February 3, 2025, when more than $2.2 billion in leveraged positions had to be liquidated. The event occurred when the U.S. implemented new tariffs for Canada Mexico and China which created increased market uncertainty.

Market Impact of U.S. Tariffs

Under the leadership of Donald Trump, the U.S. administration added 25% tariffs for Canadian and Mexican imports and 10% duties on Chinese goods. The trade measures imposed by the United States to resolve trade imbalances alongside national security issues forced the affected nations to retaliate right away. Mexican and Canadian governments started their trade barrier initiatives against U.S. products while China prepared to bring a World Trade Organization dispute against the United States. 

Cryptocurrency Market Response

These market developments led to major decreases across the cryptocurrency market. During the day Bitcoin experienced a 6.5% price drop which caused its value to reach $91,200 before it slightly rebounded to $93,600. The Ethereum market experienced a severe decrease resulting in a 20% depreciation which brought its value to $2,500. The market together liquidated $1.87 billion worth of long positions while selling $345 million worth of short positions as recorded by CoinGlass. 

Broader Market Effects

The impact extended beyond major cryptocurrencies. The losses of top-100 altcoins reached between 15% and 30% in this timeframe making the entire sector more fearful. The market-wide implementation of leverage resulted in downward price movements which became more pronounced through successive liquidations. 

Analyst Perspectives

The current situation shows parallels in terms of impact to the Terra (LUNA) collapse and FTX downfall according to market analysts. Analysis reports that this altcoin price dip surpasses the worst crashes that occurred after the COVID-19 pandemic making it the market's most intense collapse so far. Traders should be cautious while refraining from risky leveraged trading to minimize losses. 

The next period holds essential significance to determine if the steep market drop will be brief or will produce an extended period of decline. Folks in the market should observe ongoing events while handling their trading choices with cautious care.