The price of Bitcoin made a bearish technical pattern on Monday as a result of trade tensions between the US and the European Union, causing $864 million in cryptocurrency liquidations.
Bitcoin dropped by 3% to $92,284 but later settled at $92,672.
This sell-off can be attributed to the susceptibility of these digital currencies to macroeconomic events, especially where leverage is high in the derivatives markets.
This affects both retail and institutional investors who consider these digital currencies as a hedge against the risks posed by the conventional markets.
Trade Tensions Spark Market Rout
U.S. President Donald Trump imposed tariffs on eight European countries in retaliation for their opposition to his plan to buy Greenland.
The 10% tariffs take effect Feb. 1 on imports from Denmark, Norway, Sweden, France, Germany, the U.K., the Netherlands and Finland.
They increase to 25% on June 1 if there’s no agreement.
Condemnation came from European leaders, who threatened a “dangerous downward spiral,” according to EU Commission President Ursula von der Leyen and Council President Antonio Costa.
French President Emmanuel Macron said the tariffs were “unacceptable.” The EU may impose retaliatory tariffs on $108 billion in U.S. goods.
Stocks fell globally and European shares plummeted more sharply. U.S. Trade Representative Jamieson Greer called for separation of the issue from a July trade deal.
Liquidations Highlight Leverage Risks
This sparked a wave of $864 million worth of liquidations in the crypto markets over 24 hours.
Long positions were responsible for $783 million. The biggest falls were in Bitcoin futures and Ethereum.
The data illustrates that $875 million was liquidated during periods of peak initial Asian hours.
Of course, as leverage increases during periods of lower volatility, the weakest links can show vulnerability too.
Bearish Signals Emerge on Charts
Bitcoin is struggling below major moving averages. A bearish Kumo Twist formed in weekly charts.
Momentum indicators signal decreasing purchase strength. It is below the average price of 365 days at $101,000.
Rebounding volumes have been decreasing, indicating a lack of conviction among buyers. Analysts monitor the $92,000 support area.
Macro Drivers Dominate Outlook
Bitcoin still remains tied to macro conditions such as rates, inflation, and geopolitics.
Trade uncertainty could keep volatility high. Institutions generally reduce exposure in periods of stress.
Long-term, network security and adoption remain. Short-term, traders prefer defense until tensions ease and leverage clears.
Key Milestones Ahead
EU ambassadors to meet Monday to discuss responses. The European Parliament may put off trade agreement ratification, now set for Jan. 26. U.S. markets are set to reopen following a holiday.
Bitcoin might move between $92,000 and $98,000 in January, according to CoinDCX. Bulls target $105,000
