Over the past 24 hours, Bitcoin briefly dipped below $92,000, triggering $2.028 billion in liquidations across exchanges. This included $1.766 billion in long positions and $270 million in short positions. A staggering 700,594 traders were affected, with the largest single liquidation occurring on Binance's ETH-USDT pair worth $25.635 million.
Market Triggers Behind Bitcoin's Decline
1. DeepSeek Sparks "Mini Financial Crisis"
The rapid rise of AI model DeepSeek—which surpassed ChatGPT in U.S. App Store downloads on January 27—has shaken investor confidence in tech infrastructure investments. With training costs under $6 million compared to competitors' billion-dollar budgets, DeepSeek triggered a 5.3% drop in Nvidia shares and a 400-point Nasdaq decline. Crypto markets followed suit:
- Bitcoin fell 4.4%
- Ethereum dropped 3.8%
ARK Invest CEO Cathie Wood noted this "accelerates the cost collapse in AI," creating sustained market volatility.
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2. Trump Administration Tariffs Take Effect
New 25% tariffs on Canadian/Mexican imports and 10% on Chinese goods (effective February 4) raised recession fears. Market reactions included:
- BTC briefly testing $91,000 support
- Mixed analyst outlooks: short-term panic vs. long-term bullish dollar weakness
BTC Markets CEO Caroline Bowler observed: "Tariff concerns are bleeding into altcoin and Bitcoin markets."
3. El Salvador Reverses Bitcoin Legal Tender Status
On February 2, El Salvador amended its Bitcoin Law under IMF pressure, removing requirements for:
- Merchant acceptance
- Tax payments in BTC
- Official currency designation
Despite this, on-chain data shows continued accumulation (+5 BTC on February 1, totaling 6,055 BTC worth ~$618 million).
Key Takeaways for Traders
| Factor | Immediate Impact | Long-Term Effect |
|---|---|---|
| AI Disruption | Tech stock sell-off | Accelerated cost efficiency |
| Trade Tariffs | Risk asset selloff | Potential dollar weakness |
| Regulatory Shift | Symbolic blow | Minimal practical change |
FAQ: Understanding the Crash
Q: Should I sell my Bitcoin holdings?
A: Not necessarily. Market corrections often create buying opportunities for long-term investors.
Q: How long will this volatility last?
A: Until macroeconomic uncertainties (tariffs, AI sector adjustments) stabilize—likely weeks, not days.
Q: Does El Salvador's decision matter?
A: Mostly symbolic. The country still holds significant BTC reserves.
Q: What's the safest strategy now?
A: Dollar-cost averaging and portfolio diversification across asset classes.
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Remember: Past performance doesn't guarantee future results. Always conduct your own research before trading.