The cryptocurrency market experienced its most dramatic correction in weeks as President Donald Trump's surprise announcement of sweeping tariffs sent shockwaves through digital asset markets.
Bitcoin plummeted from near-record highs above $111,000 to $108,000, triggering over $500 million in liquidations and putting bullish momentum at risk just days before a crucial $13.8 billion options expiry.
Trump's announcement late Friday caught markets off guard, proposing a devastating 50% tariff on all European Union imports effective June 1, alongside a 25% levy on Apple iPhones manufactured outside the United States. The president justified these measures by citing "persistent trade imbalances and regulatory barriers," accusing the EU of maintaining unfair trade practices that harm American businesses.
The timing couldn't have been worse for crypto bulls. Bitcoin had been riding a wave of institutional optimism, supported by $1.9 billion in net inflows into US spot Bitcoin ETFs between May 20-22. The digital asset was approaching what many analysts considered a critical psychological barrier at $110,000, with bullish momentum seemingly unstoppable.
That changed in minutes. Bitcoin's swift drop from $111,000 to $108,000 represented more than just a price correction - it signaled the return of macro-driven volatility that had been largely absent during the recent rally.
Liquidation Carnage Across Crypto Markets
The market's reaction was swift and brutal. According to CoinGlass data, crypto traders saw over $500 million in leveraged positions liquidated within 24 hours, with nearly all liquidations coming from long positions - traders betting on higher prices.
Bitcoin futures alone accounted for approximately $181 million in liquidations, while Ethereum futures saw close to $142 million wiped out. The carnage extended across the altcoin spectrum, with Solana, XRP, and Dogecoin experiencing liquidations ranging from $30 million to over $100 million each.
The largest single liquidation was a staggering $9.53 million BTC-USDT swap on OKX, highlighting the extreme volatility and potential market turning point. In the initial four-hour period following Trump's announcement, $64.13 million in crypto positions were liquidated, with long positions accounting for $34.05 million and shorts making up $30.09 million.
Perhaps most telling was the shift in market sentiment reflected in Bitcoin's long-short ratio. Previously dominated by long positions at 54%, the ratio became almost equal, indicating short-term uncertainty about the market's direction.
High-Profile Casualties
The liquidation wave claimed some notable victims, including the mysterious trader known as "James Wynn" on the Hyperliquid exchange. This trader had gained significant attention for opening a massive $1.1 billion Bitcoin long position with 40x leverage. Following the tariff announcement, Wynn found himself sitting on $7.5 million in unrealized losses, with the position facing liquidation if Bitcoin drops to $102,000.
This high-profile casualty underscored the risks inherent in leveraged crypto trading, particularly during periods of sudden macro-driven volatility. The trader's predicament became a cautionary tale shared widely across crypto social media platforms.
Broader Market Impact
The crypto sell-off didn't occur in isolation. European stock indices fell sharply following Trump's announcement, while US tech shares also faced selling pressure. This correlation highlighted crypto's continued sensitivity to broader economic and geopolitical developments, despite its often-touted status as a hedge against traditional market stress.
Major altcoins mirrored Bitcoin's decline, with Ethereum dropping 3-4%, while smaller-cap tokens like Uniswap and SUI saw more severe declines of 5-7%. The broader crypto market fell 4% over the 24-hour period, with 162,419 traders liquidated for a total of $567.65 million.
The Critical $110K Options Expiry Looms
The timing of Trump's tariff threats couldn't be more consequential for Bitcoin bulls. The digital asset is approaching its largest monthly options expiry of 2025, with total exposure reaching $13.8 billion set to expire on May 30.
This expiry presents a critical juncture for Bitcoin's price action. Bulls had been positioning for a push above $110,000, with call options representing significant exposure. The open interest breakdown reveals the stakes:
- Between $110K-$114K: $4.8 billion in calls versus just $120 million in puts, favoring calls by $4.7 billion
- Between $107K-$110K: $3.7 billion calls versus $350 million puts, favoring calls by $3.35 billion
- Between $105K-$107K: $3.3 billion calls versus $650 million puts, favoring calls by $2.65 billion
Critically, 95% of the $6.5 billion in put options are set below $109,000, meaning if Bitcoin maintains current levels, less than $350 million worth of put options will remain relevant at expiry.
Trade War Fears Resurface
The tariff announcement rekindled fears of an escalating trade war, reminiscent of previous tensions that roiled global markets. Earlier this month, a US-China trade deal had provided much-needed stability to crypto markets, suggesting that macroeconomic uncertainty might be priced in. Trump's EU threats have injected renewed concerns about broader economic disruption.
Analysts warn that the tariff announcement could mark the beginning of more extensive economic turbulence. If threats escalate into a full trade dispute, risk assets including cryptocurrencies may face sustained headwinds. The EU's response and any signs of negotiation will be closely watched by traders seeking direction.
Market Structure Under Pressure
The liquidation event revealed interesting dynamics in Bitcoin's market structure. Despite record prices, there had been an unusual tilt toward short positions in BTC derivatives leading up to the tariff announcement. This positioning may have amplified the liquidation cascade as shorts were forced to cover positions during the initial decline.
The futures market shows $79 billion in total open interest, indicating strong demand for short positions. However, this strategy could backfire if Bitcoin recovers above $110,000, potentially forcing bears to close positions and creating upward pressure.
Final thoughts
As Bitcoin hovers around $108,000-$109,000, bulls face a critical test in the coming days. The combination of the May 30 options expiry and ongoing geopolitical uncertainty creates a volatile environment where significant price moves in either direction remain possible.
The recent $1.9 billion in ETF inflows demonstrates that institutional demand above $105,000 remains robust, providing a potential floor for the current correction. However, the macro environment's destabilization through renewed trade war fears means traders may remain cautious heading into next week's sessions.
For Bitcoin to maintain its bullish trajectory and potentially set new all-time highs, it must navigate both the technical challenge of the options expiry and the fundamental uncertainty created by Trump's trade policies. The next few days will likely determine whether the recent correction represents a temporary setback or the beginning of a more significant pullback from record highs.
The crypto market's reaction to Trump's tariff threats serves as a stark reminder that despite its growing institutional adoption, digital assets remain sensitive to macro-driven events and geopolitical developments. As the situation remains fluid, traders and investors will be watching closely for any signs of escalation or negotiation that could further impact market sentiment.