Crypto Market Crash- Ethereum and Altcoins Fall 20% in 24 Hours – What’s Next for the Crypto Market?
Crypto Market Crash– The cryptocurrency market experienced a sharp decline on February 3, 2025, following the announcement of U.S. President Donald Trump’s new tariffs on imports from China, Canada, and Mexico. The market saw widespread losses, with Ethereum (ETH) and other top altcoins taking significant hits in a very short time frame.
Ethereum and Altcoins Take Major Hits
Ethereum, the second-largest cryptocurrency by market capitalization, saw a steep drop of 16% in just one hour, falling to $2,368 before recovering slightly to $2,521. Despite the recovery, Ethereum is still down 38% from its peak of $4,078 in December 2024. Other altcoins, including Avalanche (AVAX), XRP, Chainlink (LINK), and Dogecoin (DOGE), have also taken significant losses, falling over 20% in the last 24 hours.
This decline has contributed to a broader slump in the crypto market, with the total market capitalization dropping by 11.4% to $3.17 trillion, as reported by CoinGecko.
Market Sentiment and Lack of Investor Confidence
Markus Thielen, founder of 10x Research, stated, “The sharp drop in altcoins reflects a wave of stop-loss triggers combined with a buyer’s strike from retail investors.” He noted that trading volumes had been steadily decreasing in recent weeks, signaling a lack of conviction and waning appetite from investors.
Though the tariffs were anticipated, they had not been fully priced in by the market, with investors instead focusing on other news, such as DeepSeek. Thielen warned of potential prolonged uncertainty in the market, with the support zones for cryptocurrencies largely dependent on the performance of U.S. equities. As of February 3, Nasdaq 100 futures slumped by nearly 2.7%, while other major indices, including the S&P 500 and Dow Jones, also experienced declines.
Fear and Greed Index Reflects Investor Sentiment
The Crypto Fear & Greed Index, a gauge of overall market sentiment, also saw a significant dip, dropping 16 points into the “Fear” zone, with a score of 44 out of 100. This is the lowest the index has been since October 2024.
Bitcoin Shows Resilience Amid Altcoin Rout
Bitcoin (BTC) experienced a 6.8% drop in the past 24 hours, falling to $94,743, but it was not hit as hard as the altcoins in the latest downturn. As a result, Bitcoin dominance in the market rose significantly, climbing from around 61.1% to 64%. Thielen suggested that rising Bitcoin dominance without an increase in the total crypto market cap indicates that more risk-averse traders are shifting their investments from altcoins to Bitcoin.
Nasdaq Futures Plunge Amid Tariff Uncertainty
In tandem with the cryptocurrency market’s turmoil, U.S. stock futures also saw significant losses following Trump’s tariff announcements. The Nasdaq 100 futures dropped by almost 2.7% on February 3, while other indices like the Russell 2000, S&P 500, and Dow Jones also fell by 3.2%, 2%, and 1.5%, respectively.
The market’s negative reaction was directly tied to President Trump’s decision to impose a 25% tariff on imports from Canada and Mexico, as well as a 10% tariff on China. The tariffs are set to take effect on February 4, 2025.
According to Coinglass data, $2.2 billion worth of liquidations occurred in the crypto market over the past 24 hours. This marks the largest liquidation event since the COVID-19 period. A total of 723,751 traders were wiped out during these liquidations.
A Shift in Market Risk Assessment
George Saravelos, head of FX research at Deutsche Bank, commented, “The market needs to structurally and significantly reprice the trade war risk premium with the announcements at the weekend roughly three times larger than what was envisaged.” This view was echoed by Tobin Marcus from Wolfe Research, who suggested that markets may now need to take Trump’s tariffs more seriously than they had previously. The heightened risk around these tariff actions could make for a rough day for markets in the coming weeks.
Crypto Markets See Billions in Outflows
Alongside stock market losses, the crypto market also saw significant outflows, with nearly $450 billion exiting the market in just 24 hours. This resulted in a 13% drop in total market capitalization, falling to $3.12 trillion, the lowest point since mid-November 2024, according to CoinGecko data.
However, some analysts, including Jeff Park, head of alpha strategies at Bitwise, believe that the ongoing trade war could ultimately lead to higher Bitcoin prices in the long term. As the dollar weakens and U.S. government bond yields remain low, Bitcoin could be seen as a hedge, driving prices “violently higher” in the future.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrencies and stocks, particularly in micro-cap companies, are subject to significant volatility and risk. Please conduct thorough research before making any investment decisions.
Leave a comment