The crypto market lost $30 billion in capitalization in one day - on April 7. The prices of the largest digital assets have dropped by tens of percent. Experts attributed this to the growing uncertainty surrounding the economic consequences of the US imposition of trade duties.
The US authorities announced the introduction of duties ranging from 10 to 50% for more than 180 countries on the evening of April 2. Last week, the crypto market maintained stable price levels, despite the fall in the main stock indexes tracking prices for the largest American stocks — the S&P 500 and NASDAQ 100. However, by the evening of April 6, it began to decline sharply.
Against the background of price stability in the crypto market at the end of the previous trading week, on April 3 and 4, experts assumed that digital assets could become a hedging instrument against falling stocks in the United States, as Jeff Kendrick, head of digital asset research at Standard Chartered, noted on April 5. However, on the evening of April 6, the situation changed dramatically.
"For a moment, it seemed that the cryptocurrency would remain stable, but given the round—the-clock nature of the crypto markets, investors woke up on Sunday with the intention of selling," said Charlie Sherry, head of finance and cryptocurrency analytics at BTC Markets, according to a quote from SCMP.
The price of bitcoin (BTC) fell below $75 thousand, Ethereum (ETH) — below $1.45 thousand, Solana (SOL) — below $100, XRP (XRP) fell to $1.65. All cryptocurrencies from the list of the 100 largest by capitalization, without exception, fell by more than 25%, according to Coinmarketcap on April 7.
The total market capitalization dropped to $2.37 trillion, which was a drop of about 12%.
The price of Ethereum has suffered some of the most significant losses, dropping to a two-year low of about $1,400, which has not been seen since March 2023. And paired with bitcoin (ETH/BTC), the value of ETH dropped to a new five—year low of 0.019, a level that has been held since the beginning of 2020.
The drop in quotations on the spot markets also led to a huge number of liquidations of trading positions on the futures markets.
According to Coinglass, over the past 24 hours, more than $1 billion worth of long positions have been eliminated, of which almost $650 million has been eliminated in the past 12 hours alone. More than 370,000 traders suffered losses on the largest crypto exchanges, betting on growth.
Liquidations occur when the price goes against the trader's position with leverage, and the exchange forcibly closes the deal at a loss due to a lack of collateral.
For example, if you bet on the growth of bitcoin with 10x leverage and your own $100, a 10% drop in price will lead to a complete loss of funds: the exchange will close the deal to return the borrowed $900.
Experts warn that the drop in cryptocurrencies may be a leading indicator that indicates the direction of traditional markets on Monday.
"The crypt is usually a leading indicator for risky assets. Expect sharper corrections after the U.S. stocks open today," said Julia Zhou, chief operating officer of cryptocurrency market maker Caladan.
It's probably not just about cryptocurrencies. Analysts point to global economic uncertainty.
"If these trade duties really lead to a large—scale trade war, it will be very unpleasant for the whole world," Nick Pakrin, founder and market analyst at Coin Bureau, told Cointelegraph.
Other analysts noted that as soon as the unrest in the markets calms down, prices, at least for cryptocurrencies, will begin to recover.
"When there is more calm and peace in the markets, we will begin to see a turn towards the crypto markets, investors will start buying on the downturn, realizing that some assets are undervalued. The introduction of duties in early April is the peak of uncertainty and no further surprises are expected," said Michael van de Poppe, founder of MN Consultancy.
Others point out that investors need to accept that bearish sentiment dominates the markets, even despite bitcoin's long-term potential.
"All signs point to a bear market, and investors will have to accept this new reality despite long—term bets," said Augustine Feng, head of SignalPlus' analytical department.
