THE LARGEST MASSACRE IN HISTORY IN A SINGLE DAY

Ladies and gentlemen, if you are reading this we are in a black Monday in the last 24 hours, 746,904 traders were liquidated, the total liquidations amount to 2.32 billion dollars. In this article we are going to bring you an analysis (and many graphics) on the crash that shook the market this weekend of February 1.

The largest liquidation order occurred in HTX in the BTC/USDT pair for a value of 38.78 million dollars. This massive liquidation that we have seen in these last 24 hours has been greater than the collapse of LUNA, the collapse of FTX or covid-19. (pay attention to this data because it may not necessarily be as bad as it sounds)

Bitcoin is still in the 94k-95k range, Dominance has shot up to +64%, the bleeding has been mainly in Altcoins.

Trump returns to power and protectionism returns

He has imposed tariffs of 25% on products from Canada and Mexico (except Canadian oil, at 10%) and an additional 10% on Chinese imports, US trading partners react with retaliation, rekindling fears of an inflationary rebound, as markets begin to discount a price increase on all products related to the value chain that these tariffs may affect. Higher inflation makes the market more cautious and profit taking at these levels begins to be a tempting option.

Two key contexts: “Triffin” dilemma and Trump's goals.

Triffin's Dilemma

The dollar as the world's reserve currency gives the US an "exorbitant privilege," but it also creates structural imbalances (overvalued currency, chronic trade deficit and cheap debt).

Trump's goals:

He seeks to influence the dollar and interest rates for economic and, in part, personal reasons (his track record in real estate benefits from lower rates) and under these two contexts of the dollar as a reserve and a Trump who wants to make the dollar cheaper compared to other assets, he makes tariffs be used as a short-term pressure tactic.

That is, weaken the dollar to correct its overvaluation without losing the ability to finance itself at a low cost.

The US could force other nations to reduce dollar reserves or to move to longer-duration Treasury securities, seeking to control the yield curve (YCC) in a covert manner.

Trudeau has imposed a 25% tax on American products such as beer, wine or clothing. Mexico and China also announce retaliatory measures, although without detailing how these measures would be. Europe and Japan, which are the other major trading partners of the US in terms of tariffs, are analyzing their responses and we will surely see the result of their response during the course of this week. However, the US knows the hegemonic power it has at a commercial level, which puts it in the most comfortable position before a possible crisis or recession due to this trade war.

For now, we will put special focus on China, which depends on exports to sustain its growth, and we will see how the clash of the two titans of the global economy affects the small fish in the ocean.

Impact on markets and inflation

The FED's monetary policy is key for crypto. If tariff tensions raise inflation, the FED could maintain or even raise interest rates (now at 4.5%). Further monetary tightening reduces the appetite for risky assets, including cryptocurrencies.

Result?

▫️$BTC drops to $91,000

▫️$ETH drops to $2,140 and altcoins suffer double-digit declines (Most with drops between 20% and 40%).

▫️BTC dominance rises to 64%, marking a new cycle high, knocking down all the bullish forecasts that the crypto community had for ETH during the following weeks, or even for an ALT season at the beginning of this year.

The traditional market recovers part of the fall it suffered hours before the opening, is Black Monday fading away or is it a dead cat rise to continue falling?

The US wants, simultaneously, a weaker dollar (to export more) and lower yields on its 10-year bond (to make its financing cheaper and support the real estate sector).

The FED, however, is not lowering rates as quickly as Trump would like, so tariffs and global pressure seek to force a scenario that leads to the devaluation of the dollar and the lowering of long-term rates.

THIS CHART PREDICTED EVERY CRASH SINCE 1999! (the vertical grey lines mark recession)

Many countries, to counteract tariffs or improve competitiveness, could devalue their currency. In the short term, it makes exports cheaper, but it does not solve structural problems. Advantage? It increases external demand and reduces the trade deficit. Disadvantage? It makes imports more expensive, encourages inflation and puts pressure on economies that depend on foreign inputs.

And most importantly, who pays the bill?

Because the extra costs of tariffs usually affect final prices (consumers), generating inflation on both sides. Citizens of these countries can turn to alternative assets to protect their purchasing power.

The big winner: Bitcoin

In a world of currencies at war, where all seek to devalue, Bitcoin shines as a global and decentralized asset.

Unlike in the 1970s, the crypto ecosystem now exists to take refuge from inflation and uncertainty. The price of BTC benefits from its status as an alternative to uncontrolled issuance and could rise faster than expected.

Is it all pessimism?

Not necessarily.

Bitcoin remains close to its ATH (just 12% below). Many of the falls are due to overexposure in riskier projects (memes and on-chain AI).