From political turmoil to market crash: How Trump's tariff threats shook the crypto market

Trump stated on January 21st that the decline in U.S. stocks was due to the Greenland issue, but he believes the stock market “is nothing much” and will eventually double. However, this optimistic remark stands in stark contrast to reality. Just two days earlier, on January 19th, the crypto market plunged due to tariff threats triggered by the Greenland dispute, and the shockwave of this “Black Monday” still echoes in the market.

Two days ago’s market crash: How Greenland triggered a chain reaction

On January 19th, the crypto market experienced a collective correction. Bitcoin rapidly retreated from last week’s high of $97,000, falling below $92,000 during trading, with a low of about $92,000, a drop of $4,000. Ethereum broke below the $3,200 level, and Solana fell below $140. The trigger behind this plunge was directly linked to the Greenland dispute.

According to the latest news, Trump threatened to impose tariffs on eight European countries opposing U.S. takeover of Greenland. He announced an immediate 10% tariff increase, planning to raise it to 25% starting in June. This policy threat immediately sparked concerns about an escalation of trade wars.

Actual market response: Data speaks

Coinglass data shows that in the past 4 hours, total liquidations amounted to about $593 million, with longs accounting for nearly 90%. XRP futures open interest decreased by about 9% in 24 hours to $3.55 billion. These figures reflect how severe the panic sentiment is in the market.

Why did the crypto market react so violently?

Crypto markets are far more sensitive to policy uncertainties than traditional markets. Tariff threats not only impact the U.S. economy but also trigger concerns over a global trade war. When the EU plans retaliatory tariffs on $93 billion worth of U.S. goods, the market anticipates a slowdown in global economic growth and pressure on risk assets.

Additionally, the uncertainty surrounding the appointment of the Federal Reserve chair has heightened market anxiety. The probability of Kevin Warsh becoming the next Fed chair has surged to about 60%, surpassing the previously favored Haskett. This uncertainty further dampens risk appetite.

Technical confirmation

From a technical perspective, the downward pressure is indeed strong. XRP’s MACD indicator is declining, and RSI is at 44, indicating continued selling pressure. Matrixport’s analysis shows that although implied volatility has only slightly increased, since mid-November, overall implied volatility has actually decreased significantly, with a total reduction of about 18-25 volatility points over the past two months. This suggests market participants are employing range-bound yield enhancement strategies rather than chasing breakout moves.

Trump’s optimism and harsh reality

On January 21st, Trump said the stock market “will double,” but what he didn’t explain is: what is this optimism based on? Will tariff threats really be implemented? How will Europe respond? How will the Fed adjust its policies?

According to the latest news, analysts believe Trump may be using tariff threats as a negotiation tactic (market calls this the “TACO trade”—Trump retreating at the last minute). But in this highly uncertain environment, market participants have chosen to sell off first to avoid risks.

Decline of crypto political hype

It is worth noting that Yat Siu, co-founder of Animoca, stated that the crypto industry’s “Trump moment” has ended. The next phase will be driven by real users, solid infrastructure, and regulation, rather than individual influence. This indicates that the market is returning from political hype to fundamentals.

Summary

Trump’s remarks, though optimistic, have been opposed by actual market actions. The tariff threats triggered by the Greenland dispute have become a real market pressure, not just empty talk. From the plunge on January 19th to the rebound window on January 21st, the market is digesting this policy shock. The key questions moving forward are: Is Trump’s tariff threat a negotiation tactic or a real policy? How will Europe respond? How will the Fed set its tone? The answers to these questions will determine the market’s subsequent direction. In an environment of high uncertainty, investors need not optimistic words but clear policy signals.