Crypto Markets Blow Up $2 Billion, What Are the Reasons for the Fall?

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In the last two days before the start of 2025, Bitcoin briefly fell below $92,000 and $2.028 billion in positions were blown across the network in the last 24 hours, including $1.766 billion in long positions and $270 million in short positions. In addition, a total of 700,594 people worldwide have had their positions blown in the last 24 hours, with the largest single blown position occurring at Binance – ETHUSDT worth $25.6350 million.

Bitcoin has fallen sharply for short periods of time several times since Spring Break this year, and here are the market reasons why Bitcoin has fallen, as compiled by BlockBeats, for readers’ information only.
DeepSeek Triggers ‘Mini-Financial Crisis’

On January 27th, DeepSeek, a homegrown AI model, topped the U.S. APP Store by surpassing ChatGPT in terms of downloads, attracting the attention and coverage of the global tech and investment industries as well as the media. As DeepSeek’s performance is comparable to that of OpenAI and other costly cutting-edge models, but its training cost is less than $6 million, the foundation of the AI industry, which has always believed that “miracles can be achieved with great efforts,” has been shaken, and it has been regarded as a black swan event that triggers the financial crisis by the financial sector.

On January 29, a number of U.S. officials responded to the impact of DeepSeek on the U.S., saying that DeepSeek was “theft” and that they were conducting a national security investigation into its impact. Just the day before, President Trump called DeepSeek a positive technological achievement, and on February 2, Cathie Wood, CEO of ARK Invest, an asset investment management firm, said in an interview that DeepSeek proved that it doesn’t take that much money to succeed in AI and accelerated the cost collapse.

As a result of DeepSeek, NVIDIA fell 5.3% on the same day, the Nasdaq index fell more than 400 points, and the U.S. stock market value evaporated by nearly a trillion dollars. Bitcoin and cryptocurrencies, as risky assets, were also hit, with Bitcoin dropping 4.4 percent and ETH falling 3.8 percent. After a week of recovery, the market remained weak and set off for another huge drop on Monday. The next move in the crypto market may need to be further watched to see how U.S. stocks perform when the market opens.
Trump administration tariffs land

The tariffs promised during Trump’s campaign for the U.S. presidency have also fallen into place in recent days. on February 2, the U.S. government announced a 25% tariff on imports from Canada and Mexico. U.S. President Donald Trump signed a tariff order on the same day, imposing an additional 25% tariff on imports from Canada and Mexico and a 10% tariff on energy resources from Canada. The tariffs are tentatively scheduled to take effect on the 4th. The White House has said the U.S. may increase the tariffs if it retaliates against them.

The move comes after Trump signed an executive order on January 1 to impose a 10 percent tariff on imports from China. The White House said on the same day that the U.S. would impose a 10 percent tariff on top of existing tariffs on all goods imported from China. Trump said this was in line with the ‘protectionist measures’ he supports.

On the 3rd, Trump added that he would ‘definitely’ impose new tariffs on the EU. He again complained about the U.S. trade deficit with the EU and argued that the EU does not import enough U.S. cars and agricultural products. Trump did not specify the level of tariffs or a timetable. He told the media, “I wouldn’t say there’s a timetable, but there will be soon.”

According to Bloomberg, BTC Markets CEO Caroline Bowler said, “Trump’s tariff policy is affecting the entire market, with fears of a trade war and stagflation-induced recession spilling over into the cottage and bitcoin markets.” On the news of the tariffs, BTC fell to near $91,000 at one point, its lowest level in more than two weeks. But on the other hand, Jeff Park, head of strategy at Bitwise Alpha, also said that Trump’s trade tariff policy will push up the price of bitcoin in the long run as it will lead to the weakening of the U.S. dollar in the global currency markets and bring down U.S. Treasury yields.
El Salvador Removes Bitcoin’s Fiat Status

On January 30, El Salvador’s Congress has swiftly passed legislation to amend its bitcoin laws to comply with International Monetary Fund (IMF) protocols, according to Cointelegraph. Elisa Rosales, a member of the ruling party’s parliament, said the amendment was intended to ensure the “permanence of Bitcoin as legal tender” while promoting its “practical application.

On February 2, El Salvador’s Congress (controlled by the ruling party) passed a low-profile amendment to the Bitcoin Law that removes Bitcoin’s status as an official currency, leaving its use entirely up to individual choice. The reform comes after nearly two years of pressure from the International Monetary Fund (IMF), which conditioned its approval of a $1.4 billion loan on the Salvadoran government’s ‘mitigation of the risks of Bitcoin’.

El Salvador, which was the first country in the world to adopt Bitcoin as legal tender, has become the first to abandon the policy. Bitcoin is no longer a ‘currency’ in El Salvador, and its use is completely voluntary Members of Congress amended six articles of the Bitcoin Law and repealed three (out of a total of 16 articles in the bill since its inception). From now on:

• Bitcoin is no longer considered ‘currency’ and merchants are no longer required to accept Bitcoin as payment.
• Their use is voluntary and they no longer have legal capacity to pay.
• The government no longer accepts bitcoin for tax purposes.

The ruling party reluctantly accepted the change, but did not publicize it. President Buerkle has not commented on it so far, despite being very active on social media. However, on-chain data shows that El Salvador continues to increase its bitcoin holdings, with the country adding five BTC in the last 24 hours on Feb. 1, bringing its total position to 6,055.18 BTC valued at $618,113,096 U.S. dollars. On January 20, El Salvador added 11 BTC ($1,113,508) to its holdings. On January 14, Bitcoin Magazine reported that Max Keiser, a senior Bitcoin advisor to the president of El Salvador, revealed that President Bukele is preparing to install Bitcoin nodes in every home in the country.