Author: 0xFacai, BlockBeats
In the last two days before work resumes in 2025, Bitcoin briefly fell below $92,000, with a total liquidation of $2.028 billion across the network in the past 24 hours, including $1.766 billion in long positions and $270 million in short positions. Additionally, in the last 24 hours, a total of 700,594 people globally were liquidated, with the largest single liquidation occurring on Binance - ETHUSDT worth $25.635 million.
Since the Spring Festival holiday this year, Bitcoin has experienced multiple sharp declines. Below are the market reasons for Bitcoin's drop compiled by BlockBeats, for readers' reference.
DeepSeek Triggers "Mini Financial Crisis"
On January 27, the domestic AI large model DeepSeek surpassed ChatGPT in downloads, topping the US App Store charts, attracting global attention from the technology, investment, and media sectors. Due to DeepSeek's performance comparable to that of costly cutting-edge large models like OpenAI, but with training costs of less than $6 million, the AI industry's belief in "great efforts yield miracles" has been shaken, leading the financial sector to view it as a black swan event that could trigger a financial crisis.
On January 29, several US officials responded to DeepSeek's impact on the US, stating that DeepSeek is "theft" and that a national security investigation is underway regarding its effects. Just the day before, President Trump had referred to DeepSeek as a very positive technological achievement. On February 2, ARK Invest CEO Cathie Wood stated in an interview that DeepSeek proves that success in the AI field does not require so much money and accelerates the collapse of costs.
Affected by DeepSeek, Nvidia's stock fell by 5.3% on that day, the Nasdaq dropped over 400 points, and the US stock market lost nearly a trillion dollars in value. Bitcoin and cryptocurrencies, as risk assets, were similarly impacted, with Bitcoin dropping 4.4% that day. ETH fell by 3.8%. After a week of recovery, the market remained weak and experienced another significant drop this Monday. The future trend of the crypto market may need further observation of the performance after the US stock market opens.
Trump Administration Tariffs Take Effect
The tariff measures promised during Trump's presidential campaign are gradually being implemented. On February 2, the US government announced a 25% tariff on imported goods from Canada and Mexico. President Trump signed a tariff order that day, imposing an additional 25% tariff on imports from Canada and Mexico, and a 10% tariff on energy resources from Canada. The tariffs are set to take effect on the 4th. The White House indicated that if retaliatory tariffs are imposed, the US may increase the tariff rates.
Previously, on the 1st, Trump signed an executive order imposing a 10% tariff on goods imported from China. The White House stated that the US would impose an additional 10% tariff on all goods imported from China on top of existing tariffs. Trump stated that this aligns with his supported "protectionist measures."
On the 3rd, Trump also stated that he would "definitely" impose new tariffs on the European Union. He complained again about the US trade deficit with the EU and believed that the EU imports insufficient American cars and agricultural products. Trump did not specify the tariff levels or timeline. He told the media, "I won't say there is a timeline, but it will happen soon."
According to Bloomberg, BTC Markets CEO Caroline Bowler stated, "Trump's tariff policy is affecting the entire market, and concerns about a recession triggered by the trade war and stagflation are spreading to the altcoin and Bitcoin markets." Following the tariff news, BTC briefly fell to around $91,000, the lowest level in over two weeks. On the other hand, Bitwise Alpha's strategy director Jeff Park also stated that Trump's trade tariff policy will drive up Bitcoin prices in the long term, as it will weaken the dollar in the global currency market and lower US Treasury yields.
El Salvador Cancels Bitcoin's Legal Tender Status
On January 30, Cointelegraph reported that the El Salvador Congress quickly passed legislation to amend its Bitcoin law to comply with International Monetary Fund (IMF) agreements. Ruling party member Elisa Rosales stated that the amendment aims to ensure the "permanence of Bitcoin as legal tender" while promoting its "practical application."
On February 2, the El Salvador Congress (controlled by the ruling party) quietly passed an amendment to the "Bitcoin Law," removing Bitcoin's status as official currency, making its use entirely dependent on individual choice. This reform was made under pressure from the IMF over the past two years, which required the El Salvador government to "reduce the risks of Bitcoin" as a condition for approving a $1.4 billion loan.
El Salvador was the first country in the world to adopt Bitcoin as legal tender and has now become the first to abandon this policy. Bitcoin is no longer considered "currency" in El Salvador, and merchants are no longer required to accept Bitcoin payments.
From now on:
- Bitcoin is no longer regarded as "currency," and merchants are no longer obligated to accept Bitcoin payments.
- Its use becomes voluntary and no longer has legal payment capability.
- The government will no longer accept Bitcoin for tax payments.
Although the ruling party reluctantly accepted this amendment, it did not publicize it widely. Despite President Bukele being very active on social media, he has not commented on this matter. However, on-chain data shows that El Salvador continues to accumulate Bitcoin, with 5 BTC added in the past 24 hours on February 1, bringing the total holdings to 6,055.18 BTC, valued at $618,113,096. Previously, on January 20, El Salvador added 11 BTC ($1,113,508). On January 14, according to Bitcoin Magazine, El Salvador's senior Bitcoin advisor Max Keiser revealed that President Bukele is preparing to install Bitcoin nodes in every household in the country.
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