The Cryptocurrency Market Faces "Black Monday": What’s Next?

Introduction

Recently, the Trump administration announced large-scale tariff increases, triggering dramatic turbulence in global capital markets. Both traditional financial markets and the cryptocurrency market, as core areas of risk assets, experienced significant sell-offs. The cryptocurrency market, in particular, went through a “Black Monday” in a short period, with multiple sectors and major coins plummeting, whale liquidations occurring frequently, and panic spreading across the market. This article will analyze the profound impact of this event on the cryptocurrency market from three perspectives: overall market performance, whale liquidation cases, and future market trends. It will also explore strategies for investors to navigate through this volatile environment based on comprehensive data.

The Market Takes a Hit: Cryptocurrency Market Cap Shrinks by Over 9%

Trump’s tariff policy quickly rippled through global financial markets, with both traditional stock markets and cryptocurrency markets suffering heavy losses.

Data indicates that the total market capitalization of cryptocurrencies fell by 9.7% within 24 hours, shrinking from $2.8 trillion to $2.53 trillion, marking the largest single-day drop in nearly six months.

Bitcoin (BTC), the benchmark of the cryptocurrency market, was hit particularly hard during this storm, briefly falling below the critical support level of $77,000, with a daily decline of 5.11%.

Ethereum (ETH) also dropped below the $1,600 threshold, plunging 11.71% within 24 hours, wiping out gains accumulated over the past 18 months.

Other major cryptocurrencies, such as Solana (SOL) and Cardano (ADA), saw declines exceeding 10%, while the Layer 2 sector experienced an overall drop of 8.92%. The DeFi sector was not spared either, with Uniswap (UNI) and Chainlink (LINK) both losing around 11%.

Across various sectors, CeFi, DeFi, Meme tokens, and others suffered widespread losses, with declines generally exceeding 10%. The DeFi sector’s total market cap shrank by over 10.27%, while the Meme token sector dropped by 10.35%. Historical market indices reflecting sector performance showed that DeFi, Meme, and SocialFi sectors all recorded declines of over 10%. Meanwhile, funding rates remained low, indicating extreme market fear dominated by bearish sentiment.

Macroeconomic uncertainty, liquidity crises, and policy risks were the main drivers of this market downturn. Trump’s tariff policy not only impacted the traditional economy but also heightened investors’ concerns about the high volatility of the cryptocurrency market. Against this backdrop, safe-haven sentiment surged, leading to massive capital outflows. This panic-driven sell-off not only exacerbated the market’s decline but also made investors more cautious about future trends.

Whale Liquidation Frenzy: Heightened Risks Amplify Market Panic

Against the backdrop of market crashes, high-leverage operations triggered a wave of whale liquidations, becoming another focal point of this event.

On-chain data shows that in the past 24 hours, total liquidation amounts reached $986 million, with long positions accounting for $850 million. The continuous liquidation of whales further amplified market panic, creating a vicious cycle.

One whale, who had collateralized 9,370 WETH to borrow $12.8 million USDT, was liquidated after WETH fell below $1,700, losing 4,480 WETH (approximately $7.26 million). Another whale, holding 67,500 ETH (valued at $105 million) in a lending position, was completely liquidated when ETH dropped to $1,650, repaying $74.4 million in DAI loans. Although this whale had added 2,160 ETH as collateral earlier in the morning to lower the liquidation threshold, it still couldn’t avoid forced liquidation. Additionally, a whale leveraging AAVE investments faced near-liquidation of their 102,000 AAVE position (valued at $13.08 million) as AAVE’s price approached the liquidation line. Despite proactive measures to reduce positions, the whale remained under significant pressure.

These liquidation events have fully exposed the risks of high-leverage operations. As prices fluctuated sharply, whale liquidations further intensified downward pressure on the market, creating a vicious cycle. In markets with insufficient liquidity, liquidation actions often trigger chain reactions, causing market depth to deteriorate further. This liquidation frenzy not only inflicted massive economic losses on market participants but also severely undermined overall market confidence.

What’s Next? Volatility Likely to Persist

In the short term, cryptocurrency market volatility is expected to persist. Funding rates and on-chain data both indicate that market sentiment remains bearish, with investors lacking confidence in future trends. As liquidation events continue to unfold, selling pressure may intensify further. Restoring market sentiment will take time, especially given the ongoing uncertainty surrounding macroeconomic policies, prompting investors to adopt a wait-and-see approach.

Despite short-term uncertainties, historical patterns suggest that markets often present new opportunities following major corrections. Particularly as the macroeconomic environment gradually stabilizes, the innovative value and decentralized nature of the cryptocurrency market may once again attract investor attention. In the long run, the market’s resilience remains promising, especially amid continuous advancements in blockchain technology and applications.

In this environment, investors must remain rational and avoid high-leverage operations. They should focus on changes in market fundamentals and select projects with long-term value for investment. For short-term investors, strict stop-loss strategies and risk management are crucial. Given the high level of uncertainty in the market, diversification and position control have also proven to be effective risk mitigation strategies.

This “Black Monday” triggered by Trump’s policies serves as a stark reminder that the cryptocurrency market, as a high-risk asset, is closely tied to the macroeconomic environment. From overall market performance to whale liquidation frenzy and future trends, this event has sounded the alarm for investors. In such a volatile market environment, investors must heighten their risk awareness and cautiously navigate the uncertainties ahead. At the same time, they should keep an eye on potential opportunities arising from market adjustments and prepare for the next wave of market recovery.