Concerns about a 'tariff war' originating from the United States have caused a sharp decline in virtual asset prices, resulting in the largest forced liquidation in cryptocurrency history. While there is a prevailing evaluation in the market that this is excessive, there are also interpretations suggesting that it has clearly revealed the limitations of Bitcoin as an 'inflation hedge' like gold.
According to cryptocurrency data analysis firm Coinglass, as of 6 p.m. on the 3rd, a total of 742,778 individuals had been liquidated in the virtual asset derivatives market, amounting to $2.26 billion (approximately 3.31 trillion won) over the past 24 hours. This level significantly surpasses the previous maximum liquidation during the FTX incident, which was around $1.6 billion.
The liquidation scale of 'long positions' betting on a price increase amounted to $1.89 billion (2.77 trillion won), while the liquidation scale for 'short positions' anticipating a price decline was $375 million (5400 million won). By virtual asset, the liquidation scale for Bitcoin was the largest at $8.69 million. Ethereum followed with $7.12 million, Dogecoin with $2.54 million, and Ripple with $1.98 million. In the derivatives market, if prices move contrary to expectations and losses occur without covering the margin, forced liquidation ensues.
The record-high liquidation scale is attributed to concerns arising from the 'second Trump administration's tariff war.' As interpretations emerged that inflation would worsen and interest rate cuts would become more difficult due to the tariff war, virtual asset prices plummeted. Investors who leveraged investments anticipating price increases under a pro-virtual asset Trump administration suffered substantial losses.
According to CoinMarketCap, the price of Bitcoin dropped sharply from around $105,000 on the morning of the 31st of last month to as low as $92,000 at one point on this day. As of 6 p.m. on this day, Ethereum fell by 16% in just one day, Ripple by 17%, and Binance Coin (BNB) by 11.7%.
The market considers this as an excessive decline. Unless liquidity sharply diminishes, instances of bouncing back after short-term adjustments have been frequent, making it difficult to interpret this as the beginning of a prolonged downward trend like the FTX incident.
Jung Min-kyu, an analyst at Prestory Research, noted, "It is still difficult to say that the fundamentals have changed as the U.S. government remains in a pro-virtual asset position," adding, "We interpret this as an excessive decline."