Cryptocurrencies led risk assets lower on Tuesday, January 20 as concerns about escalating tariffs soured sentiment and provoked market turmoil.
Bitcoin, the world’s largest digital currency by total market capitalization, fell to almost $88,000, having declined roughly 5% in under 24 hours, according to Coinbase data from TradingView.
Ether, the second-largest cryptocurrency by total market value, depreciated to almost $2,900, dropping more than 8% in less than 24 hours, additional Coinbase figures from TradingView reveal.
Stocks took a beating as well, with the S&P 500 index and the Dow Jones Industrial Average losing approximately 2.1% and 1.8%, respectively, according to Google Finance.
Interestingly enough, gold and silver moved in the opposite directions, reaching record highs, according to a Bloomberg article.
Several analysts offered their two cents on these developments, with many focusing on the uncertainty created by President Donald Trump’s comments about wanting to take control of Greenland, which is currently part of the Kingdom of Denmark.
Recently, Trump stated that he planned to impose tariffs on eight European countries because they are not aligned with his desire to take over Denmark, according to The Associated Press.
Brian Huang, cofounder of fintech firm Glider, commented on the impact that these developments have had on the global asset markets, stating via email that “Greenland related tariffs have dragged down bitcoin and stocks today. In the meantime, we see safe harbor assets like gold and silver continue to absolutely surge.”
“Throw in uncertainty around Iran and US involvement over there has investors taking risk off. Cryptocurrencies, being the most volatile, always lead the charge here, so it’s no surprise they are down today,” he added.
Tim Enneking, managing partner of Psalion, also weighed in on these developments, indicating that “Frustratingly, BTC dropped over the past two days because of Trump’s obsession over Greenland and his willingness to blow up NATO and the very positive, long-standing US relationship with Europe to try to get it.”
He contrasted the losses suffered by bitcoin with the gains enjoyed by gold, stating that “If any further demonstration was needed that Bitcoin is not (yet?) a haven asset, the last 48 hours certainly proved it. So, while gold is up almost 7% in the last 48 hours, BTC has dropped around 7%.”
William Stern, founder of Cardiff, also spoke to bitcoin’s recent inability to function as a safe haven.
“Today was the ultimate stress test for the ‘digital gold’ narrative, and Bitcoin failed,” he said via email. “Gold hit an all-time high of $4,750 while Bitcoin dumped.”
“When real fear enters the market, institutions don’t buy algorithms; they buy metal,” said Stern. “Bitcoin is still trading like a high-beta tech stock, not a bunker.”
He also weighed in on the Greenland developments, claiming that “The market hates uncertainty more than bad news. President Trump’s threat to slap 10% tariffs on our European allies over the Greenland dispute turned the 'Risk-Off’ switch firmly on.”
“Traders aren’t selling Bitcoin because the protocol is broken; they are selling because a trade war with Europe drains liquidity from everything that isn’t nailed down,” Stern added.
While several market observers emphasized the impact of trade war concerns when explaining the latest movements in risk assets, some analysts noted the influence that leverage had on these price fluctuations.
Julio Moreno, head of research for CryptoQuant, spoke to this situation, stating via Telegram that “it looks like there was a spike in short positions, traders opened short positions since Bitcoin reached $95K a few days ago and pushed prices lower.”
He referenced a chart he provided of “trader’s behavior showing short positions dominating (red triangles).” The chart is depicted below: