The Trump Tariffs, Huge Altcoin Liquidations & BTC vs. The Rest?

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This Week’s Top Stories

“The Trump Tariffs – Another Trade War?” – This week

• This week U.S. president Trump imposed new tariffs on Canada, Mexico and China in an effort to get the three nations to stem the flow of migrants and fentanyl into the United States.
• The story started over the weekend when Trump announced a new 25 percent tariff on Canadian and Mexican goods. The U.S. futures market – and the only open market at the time, crypto – reacted quite strongly to the news, as we will outline below.
• The U.S. stock market opened trading on Monday with a gap to the downside. The S&P opened 1.5 percent lower compared to Friday, and the Nasdaq opened almost 2 percent lower. Bitcoin corrected 14 percent from its high last Friday, reaching a bottom on Monday morning around $91’500. And altcoins? Well, more on that in a bit.
• On Monday, Mexico’s President and the Canadian Prime minister both confirmed that the U.S. tariffs would be suspended for a month in exchange for the two countries strengthening border control, with additional troops being deployed on the Mexican and Canadian borders.
• The market was able to calm down following the news of the one-month suspension of the tariffs, but a lot of damage was already done – especially to altcoin holders.

“The Total Liquidation Amount on Monday Was Likely Between $8 And $10 Billion.” – Monday, 3 February 2025

• On Monday morning, after the huge capitulation move in the altcoin market, the news of “the day being one of, if not the largest, liquidation events in the history of crypto”, started to spread on X. The number being mentioned was a total liquidation amount of $2.2 billion in 24 hours.
• Vetle Lunde from K33 has been mentioning that the liquidation data from exchanges has been unreliable and wrong since mid-2021, as he argues the reported numbers are too low compared to the actual amount of liquidations since then.
• On Monday, the CEO of Bybit tweeted that the real amount of total liquidations is likely far higher than $2 billion, as Bybit’s total liquidation amount during the timespan was already $2.1 billion alone, while the recorded number on Coinglass was about $333 million. He estimated that the real number of total liquidations was likely between $8 and $10 billion on Monday.

A Quick Crypto Overview: A Difficult Week For Altcoin Holders

Altcoin holders seem to be capitulating left and right – rightfully so? Monday’s crash is weighing heavily on altcoin holders, market sentiment is at multi-week lows, and Bitcoin is still trading at $97’000 at the time of writing.

Bitcoin dominance has reached a new multi-year high, at levels not seen since early 2021, and seems to be continuing its uptrend, currently sitting just below 62 percent – up from 39 percent at the end of 2022.

Ethereum has lost over 70 percent of its value compared to Bitcoin since the end of 2021 and reached a new multi-year low below 0.025 on Monday, in what appears to be a large capitulation event for ETH holders.

The U.S. stock market is trading to the upside again after Monday’s crash, the U.S. dollar index is trading to the downside, yields have also moved lower this week, gold has reached a new all-time high, and U.S. futures of the S&P 500 are currently trading above 6’100 again.

The total market capitalization excluding Bitcoin has yet to reach a new all-time high. The current all-time high was set in 2021, and the market cap without Bitcoin is currently trading at the same level as in March last year.

Chart of the Week: Bitcoin vs. The Rest Of The Market

After this week’s altcoin carnage, we are taking a look at the obvious: Bitcoin is just below $100’000, Bitcoin’s market cap is currently up 50 percent from its previous 2021 all-time high, and the total market capitalization of the altcoin market is still 30 percent below its 2021 all-time high. Let’s compare it to the last bull cycle of 2021.

While Bitcoin (Bitcoin market capitalization in black) has been outperforming the total market cap of altcoins (in red) since the 2022 bear market lows, was this also the case during the last bull market cycle? As illustrated below, the last cycle painted a different picture: The altcoin and Bitcoin market caps moved largely in tandem, with the altcoin market (in red) outperforming Bitcoin (in black) during the final stages of the bull market from the beginning of 2021 to the end of the year.

In our opinion, there are different factors influencing this change in behavior: One of the factors likely being the launch of the Bitcoin spot ETFs in January 2024, which attracted huge sums of institutional money that found its way into these new products offered by traditional financial service providers. Investors do not have the opportunity to directly trade these products into altcoins, as was the case in the previous cycle when most of the bitcoin was held on crypto-native exchanges and service providers.

Additionally, the macro dynamics over the last few years have likely been more positive for Bitcoin than for the broader altcoin market, with inflation, government spending and debt, military conflicts, and much more being discussed all over the world. Bitcoin, as the digital gold, was likely able to profit from these narratives, while many of the altcoins have not.

The launch of Pump.Fun, the memecoin-creation platform on Solana, could have been an additional catalyst for the dynamic, as it extracted a lot of capital from the altcoin market and attracted much of the new capital entering the altcoin market. Profits from memecoins were likely sold into cash and extracted from the crypto ecosystem, as many of the profiteers from memecoins were not necessarily crypto-native participants, but bad actors from various scenes. Additionally, the MEV (Maximal Extractable Value) issue on Solana continues to play a significant role by enabling actors to extract value through transaction reordering, front-running, and other forms of manipulation. This results in unfair advantages for certain participants, particularly bots and validators, which can extract profits at the expense of regular traders and the broader market.

What’s Happening On-Chain? Uniswap v4 & What’s Up With AI Agents?

Last Friday, Uniswap Labs released Uniswap v4, which is now live on Ethereum, Polygon, Arbitrum, OP Mainnet, Base, BNB Chain, Blast, World Chain, Avalanche, and Zora Network.

According to Uniswap Labs, Uniswap v4 changes the protocol into a “developer platform” because of the newly introduced "hooks" – contracts that allow developers to customize interactions within pools, swaps, fees, and liquidity provider (LP) positions. These “hooks” open the door to new features, potentially driving deeper liquidity and enabling more swaps.

AI Agents have lost a lot of headspace over the last couple of weeks, as the total market capitalization of all AI Agents is down 70 percent from its recent high in mid-January. The total market capitalization of AI Agents is sitting at $6.5 billion, with a total of roughly 1’400 Agents being counted, according to Cookie.Fun.

The question now is: Was this just another hype cycle, or do AI Agents have the potential to become one of the bigger narratives in the coming months and years? The launch platform for AI Agents on Solana and Base, Virtuals Protocol, is currently down more than 75 percent from its December 2024 all-time high.

Digital Asset Fund Flows: Modest Inflows in Turbulent Times

Digital asset investment products saw total net inflows of $527 million last week, down more than 50 percent from recent weeks, likely due to the turbulent market dynamics following the whole story around DeepSeek and the rather big correction at the beginning of last week. But it’s still interesting to see that the flows were positive nonetheless, with more than half a billion flowing into digital asset products.

Bitcoin saw the biggest bulk of the flows, with $486 million of inflows, followed by XRP with almost $15 million of net inflows.

This week started once again with a net outflow day on Monday for the Bitcoin spot ETFs, while the Ethereum spot ETFs saw net inflows of more than $80 million on Monday. On Tuesday, the Ether spot ETFs saw even larger net inflows of more than $300 million, almost matching the net inflows of $340 million into the BTC spot ETFs – an interesting change in dynamics. But we have seen this a couple of times since last summer. It’s likely too soon for ETH holders to celebrate, but it’s worth keeping an eye on.

In other news, UBS has tested its UBS Key4 Gold product on Ethereum's L2 network ZKSync, allowing its Swiss customers to directly purchase physical gold. The purpose of the experiment is to find ways to expand the supply of gold while protecting privacy.

Market Sentiment: Crypto And The Stock Market Are Fearful

With the crypto fear and greed index sitting at 44 in the fear level and the stock market at 41, also in the fear level, the market sentiment seems tense. The CoinMarketCap index for crypto market sentiment is even below 40, reaching fear levels again for the first time since October 2024.

Also, the AAII members are tending towards the bearish side again, with 42.9 percent of its members being bearish on the stock market for the next six months.

While the stock market is already trending towards the upside again, with the S&P 500 currently down only 0.7 percent from its current all-time high, the total market capitalization of crypto is still down more than 16 percent from its December all-time high.

It’s worth keeping an eye on the price action, as Bitcoin is currently trading just below $100’000, up substantially from $60’000 back in October, when sentiment was this bad for the last time.

Other Relevant News

• Tether announced the integration of its stablecoin USDT into the Bitcoin ecosystem, including its base layer and Lightning Network. – Link
• President Donald Trump signed an executive order on Monday requiring the Treasury and Commerce Departments to create a sovereign wealth fund. – Link
• BlackRock said to list Bitcoin Exchange Traded Product in Europe. – Link
• MicroStrategy renames to Strategy. – Link
• SEC moves to scale back crypto enforcement efforts. – Link

Looking Ahead: Bitcoin In A Range & Altcoins In Despair

It’s currently difficult to say something positive when it comes to altcoins, but there is still some light on the horizon. While bitcoin continues to trade in its range around $100’000, the total market cap excluding bitcoin is currently below its December range low, which was put in at $1.22 trillion. A potential reclaim of this level could spark some positive momentum in the altcoin market – it might be worth keeping an eye on.

When it comes to bitcoin – and altcoins are not excluded here – it’s worth keeping a close eye on news surrounding the Trump administration and other developments in the space of sovereign nations and their stance towards crypto.

The U.S. stock market traded to the upside this week, and the U.S. dollar index is down almost 2 percent from its Monday high. It’s possible that bitcoin and crypto will trade alongside the bigger macro picture for the coming weeks, and keep in mind that gold reached a new all-time high this week as well.

Below, you can find some of the key data releases and events to watch out for next week.

Wednesday, 12 February 2025

• USA – Core CPI, CPI
• Japan – PPI

Thursday, 13 February 2025

• Switzerland – CPI
• USA – Core PPI, PPI
• USA – Initial Jobless Claims, Continuing Jobless Claims

Friday, 14 February 2025

• Switzerland – PPI
• Eurozone – GDP, Employment Change
• Russia – Interest Rate Decision, CPI