The Crypto Market Faces a "203" Crash - What Are the Reasons?

On the last two days before the start of 2025, Bitcoin briefly dropped below $92,000, causing a total of $2.028 billion in liquidations across the network in the past 24 hours. Of this amount, long liquidations accounted for $1.766 billion, while short liquidations totaled $0.27 billion. Additionally, in the last 24 hours, a total of 700,594 people worldwide were liquidated, with the largest single liquidation occurring on Binance - ETHUSDT worth $25.635 million.

Since the Chinese New Year holiday this year, Bitcoin has experienced several sharp short-term drops. Here are the market reasons for Bitcoin's decline compiled by BlockBeats for reader reference only.

DeepSeek Triggers "Minor Financial Crisis"

On January 27, the domestic AI large model DeepSeek surpassed ChatGPT in downloads, ranking first on the U.S. App Store, attracting global attention and media coverage from the technology, investment, and media industries. Due to DeepSeek's performance comparable to large-scale cutting-edge models like OpenAI but with a training cost of less than $6 million, the AI industry's foundation, which has always believed in "great power yields great results," was shaken, leading the financial sector to view it as a black swan event triggering a financial crisis.

On January 29, multiple U.S. officials responded to DeepSeek's impact on the U.S., stating that DeepSeek was "stealing" and launching a national security investigation into its impact. Just the day before, U.S. President Trump described DeepSeek as a very positive technological achievement. On February 2, Cathie Wood, CEO of asset management company ARK Invest, stated in an interview that DeepSeek had proved that success in the AI field does not require a lot of money and accelerated cost deflation.

Impacted by DeepSeek, NVIDIA saw a 5.3% decline that day, the NASDAQ dropped over 400 points, and the U.S. stock market lost nearly $1 trillion in market value. Bitcoin and cryptocurrencies, as risk assets, also suffered the impact, with Bitcoin's daily decline reaching 4.4% and ETH falling by 3.8%. After a week of recovery, the market continued to show weakness, experiencing another sharp drop at the start of this week. The future trend of the crypto market may still need further observation based on the performance of U.S. stocks after the market opens.

Trump Administration's Tariffs Implemented

The tariff "big stick" promised by Trump during his U.S. presidential campaign has gradually been implemented in recent days. On February 2, the U.S. government announced a 25% tariff on imported goods from Canada and Mexico. President Trump signed a tariff order that day, imposing an additional 25% tariff on imported products from Canada and Mexico and a 10% tariff on energy resources from Canada. The tariffs are set to take effect on the 4th. The White House noted that if there is retaliation against U.S. tariffs, the U.S. may intensify its tariff measures.

On the previous day, Trump signed an executive order imposing a 10% tariff on goods imported from China. The White House stated that for all goods imported from China, the United States will impose an additional 10% tariff on top of the existing tariffs. Trump said that this aligns with his support for "protectionist measures."

On the 3rd day, Trump again stated he will "definitely" impose new tariffs on the European Union. He once again complained about the U.S. trade deficit with the EU and believed that the EU's imports of American cars and agricultural products were insufficient. Trump did not specify the tariff level or timetable. He told the media, "I'm not going to say there's a timetable, but it'll be soon."

According to Bloomberg, BTC Markets CEO Caroline Bowler stated: "Trump's tariff policy is affecting the entire market, and concerns about a trade war and stagflation-induced recession are spreading to the altcoin and bitcoin market." Due to the tariff news, BTC briefly fell to around $91,000, its lowest level in over two weeks. However, on the other hand, Bitwise Alpha's Head of Strategy Jeff Park also stated that Trump's trade tariff policy would raise bitcoin prices in the long term as it would lead to the weakening of the U.S. dollar in the global currency market and cause a drop in U.S. Treasury yields.

El Salvador Cancels Bitcoin's Legal Tender Status

On January 30, according to Cointelegraph, the Salvadoran Congress swiftly passed legislation to amend its Bitcoin law to comply with an International Monetary Fund (IMF) agreement. The ruling party legislator Elisa Rosales stated that this amendment aims to ensure Bitcoin's "permanence as legal tender" while promoting its "practical use."

On February 2, the Salvadoran Congress (controlled by the ruling party) quietly passed an amendment to the "Bitcoin Law," removing Bitcoin's official currency status, making its use entirely optional. This reform was made under pressure from the IMF over the past two years, with the IMF approving a $1.4 billion loan as a condition, requiring the Salvadoran government to "reduce the risk of Bitcoin."

El Salvador was once the world's first country to adopt Bitcoin as a legal tender and has now become the first country to abandon this policy. Bitcoin is no longer considered "currency" in El Salvador, as members of parliament voluntarily amended six articles of the "Bitcoin Law" and repealed three articles (making a total of 16 articles in the law since its inception). From now on:

· Bitcoin is no longer seen as "currency," and businesses are no longer required to accept Bitcoin payments.

· Its use will become voluntary and will no longer have legal tender status.

· The government will no longer accept Bitcoin for tax payments.

Even though the ruling party reluctantly accepted this amendment, they did not publicize it widely. Despite President Bukele being very active on social media, he has not yet made any comments on this matter. However, on-chain data shows that El Salvador is still accumulating Bitcoin. On February 1, El Salvador accumulated 5 BTC in the past 24 hours, bringing their total holdings to 6,055.18 BTC valued at $618,113,096. Previously, on January 20, El Salvador accumulated 11 BTC ($1,113,508). And on January 14, as reported by Bitcoin Magazine, El Salvador's senior Bitcoin advisor Max Keiser revealed that President Bukele of El Salvador is preparing to install a Bitcoin node in every household in the country.