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Crypto Markets Tumble Amid Renewed Trade Friction: Massive Liquidations and Market Implications

Main Points:

Renewed Trade Tensions Roil Global Markets

On May 30, 2025, President Donald Trump announced a dramatic doubling of U.S. tariffs on imported steel and aluminum from 25% to 50%, effective June 4, aiming to “further secure the steel industry in the United States” and emphasize domestic manufacturing priorities. The announcement came at a rally in Pennsylvania’s Mon Valley Works, where Trump asserted that the tariff increase would bolster national security and protect American workers. In response, the European Union criticized the move as undermining ongoing negotiations, warning that punitive countermeasures would be implemented if talks failed to resolve the impasse.

This escalation rekindled concerns about a broader trade war reminiscent of earlier U.S.–China tensions. Just weeks prior, U.S. and Chinese representatives in Geneva had agreed to mutually reduce certain tariffs for 90 days, lowering rates by up to 115 percentage points to de-escalate their longstanding dispute. Trump’s renewed criticisms via Truth Social further accused China of having “completely violated” tariff-reduction agreements, hinting at potential tariffs up to 145% on Chinese imports. These developments injected a fresh wave of uncertainty into global markets, heightening risk aversion across asset classes.

Immediate Impact on Crypto Prices and Liquidations

The resurgence of trade friction triggered an immediate sell-off in risk assets. Equities and commodity markets fell sharply, but the cryptocurrency market’s vulnerability to macro headlines became particularly evident. According to CoinGlass data, over $300 million in leveraged crypto positions were liquidated within hours of Trump’s announcement, as Bitcoin (BTC) and major altcoins plunged 3–4%. On May 23, following Trump’s EU tariff threat, Bitcoin dropped from approximately $111,000 to $107,367, marking a 4% decline and sparking roughly $560 million in liquidations across the crypto market.
    The pressure on derivatives was pronounced: long positions bore the brunt, with around $34 million liquidated for Bitcoin longs within the first four hours after the news, while short squeezes accounted for $30 million. As global investors rushed to de-risk, smaller-cap tokens suffered steeper drops—Uniswap and SUI tumbled by 5–7%, underscoring crypto’s continued sensitivity to macroeconomic and geopolitical shifts.

Bitcoin Price Movements and ETF Outflows

Despite the sell-off, Bitcoin demonstrated a modest rebound in early June. By June 2, BTC/USD had recovered to approximately $105,500, up 0.8% from the previous day, supported in part by optimism surrounding a Texas Bitcoin reserve bill and the prospect of favorable legislation. However, underlying volume and on-chain metrics indicated that institutional appetite was waning. CoinGlass reported a substantial $616.22 million net outflow from U.S. Bitcoin ETFs on May 30, as major investors withdrew capital in reaction to the tariff-induced volatility.
    This rapid exodus contrasted sharply with the $1.9 billion inflows observed between May 20–22, prior to the tariff announcement, and highlighted the fragility of bullish momentum near all-time highs of approximately $112,000. As the largest monthly Bitcoin options expiry of 2025 loomed on May 30—totaling $13.8 billion in open interest—the outsized concentration of call options between $110,000–$114,000 (approximately $4.8 billion) meant that sustained price levels below $109,000 would render most put options irrelevant at expiry . Such technical factors amplified downside risk, contributing to price consolidation around $105,000–$108,000 in early June.

On-Chain Insights: Structural Shifts in Market Dynamics

On-chain analyst Willy Woo noted that Bitcoin’s market structure was shifting from its traditional four-year halving cycle toward a model increasingly influenced by macroeconomic drivers like U.S. Federal Reserve policy and geopolitical events. In particular, he pointed out that sell-side pressure had emerged from larger holders anticipating a prolonged adjustment, as weak bullish divergence in weekly charts suggested waning buying momentum.
    This divergence was further reflected in funding rates across major exchanges, which briefly turned negative as liquidations surged, indicating that perpetual futures shorts were being rewarded more than longs. Such conditions hinted that speculators were bracing for lower prices, at least in the short term. The diminishing role of halving-driven cycles underscored how rapidly global liquidity conditions and trade policies now impact Bitcoin’s trajectory. As macro uncertainty deepens, on-chain metrics like realized cap, MVRV, and long-term holder behavior will likely signal whether this episode is a transient correction or a shift toward extended consolidation.

Hyperliquid Whale Liquidation: A Cautionary Tale

Concurrent with broader market turbulence, the decentralized derivatives platform Hyperliquid recorded a headline-grabbing liquidation. On May 30, a trader identified as “James Wynn” faced a forced liquidation of roughly $100 million worth of positions, having earlier amassed an 11,588 BTC long—approximately $1.25 billion—using 50× leverage. According to Arkham Intelligence, Wynn’s account balance plunged to a mere $23 following the sell-off, erasing nearly $82 million in peak profits over a single week.
    This event illuminated the perils of excessive leverage in decentralized venues. While some speculated that Wynn’s trading was backed by institutional funds—citing past transfers of 6,000 ETH from Alameda Research—others argued the account’s behavior served as a marketing spectacle for Hyperliquid, drawing attention to its high-leverage offerings. Ultimately, Wynn re-entered the market almost immediately after liquidation, underlining a risk-tolerant mindset rare even among experienced traders. His predicament reverberated across crypto social channels, serving as a stark reminder that headline-driven catalysts can trigger outsized losses when combined with lofty leverage ratios.

Texas Bitcoin Reserve Legislation: A Counterpoint

Amidst the crypto sell-off, on May 28 the Texas Legislature cleared Senate Bill 21, establishing the “Texas Strategic Bitcoin Reserve” to diversify state assets and hedge against inflatio. This legislation, if signed by Governor Greg Abbott, would make Texas the third U.S. state—after New Hampshire and Arizona—to allocate public funds to acquire Bitcoin, with strict governance via the State Comptroller’s office and cold storage requirements.
    Proponents argue that institutional adoption risks are mitigated by criteria mandating that any purchased cryptocurrency have a minimum 12-month average market cap of at least $500 billion, effectively limiting holdings to predominantly Bitcoin. Moreover, the fund’s governance structure permits staking and derivatives usage only if actuarially prudent, reflecting an attempt to balance speculative upside with fiduciary responsibility. In a broader sense, Texas’s move underscores a growing trend of state-level actors integrating crypto into diversified portfolios, signaling that regulatory acceptance and institutionalization may progress even as spot markets face volatility.

Broader Market Sentiment and Macro Drivers

The link between macro policy shifts and crypto market sentiment has become increasingly pronounced. Bank of America strategist Michael Hartnett warned that Trump’s “big beautiful bill”—encompassing tax cuts and a proposed budget—risked inflating a new speculative bubble, citing parallels in bond-stock inversions historically preceding major market top. In this context, lower corporate taxes and a deregulatory stance had driven equities and crypto to rally simultaneously, but the unexpected tariff spike introduced fresh uncertainty, causing deleveraging across risk assets.
    Simultaneously, U.S. 30-year Treasury yields rose to their highest level since 2008 amid fears of ballooning deficits driven by the GOP budget, further pressuring valuations in equity and crypto markets . The EU’s promise of retaliatory tariffs added to the climate of unpredictability, with the possibility of a multi-front trade war—covering Europe, China, Canada, and Mexico—now on the table. As economist Peter Schiff remarked, geopolitical flashpoints and tariff skirmishes have the power to “crack” crypto’s veneer of independence, reinforcing that digital assets remain tethered to traditional macro forces.

Navigating Uncertainty: What Lies Ahead

Looking forward, market participants face a dual challenge: navigating near-term technical headwinds around the May 30 options expiry and assessing the trajectory of trade policies heading into mid-2025. If Bitcoin holds support around $105,000, it may stave off a deeper correction; however, failure to reclaim $110,000 ahead of the next significant options expiry could hasten a retracement toward $100,000 or lower.
    On the policy front, developments in Texas—where SB 21 awaits Governor Abbott’s signature—and similar state initiatives signal growing acceptance of crypto as an institutional asset class, even amid episodic volatility. At the federal level, momentum behind the GENIUS Act and discussions of a Strategic Bitcoin Reserve reflect a bifurcated approach: regulators seek to harness crypto’s benefits for financial diversification while also managing systemic risks. As geopolitical tensions evolve and central banks monitor inflationary pressures, traders and investors will likely adopt a more cautious posture, favoring hedged positions and lower leverage.

Conclusion

The May 2025 episode—sparked by President Trump’s announcement to double steel and aluminum tariffs—reinforced that cryptocurrencies remain deeply intertwined with global macro developments. The immediate liquidation wave, including a $100 million Hyperliquid whale event, underscored how headline-driven volatility can swiftly unravel leveraged positions. Meanwhile, substantial ETF outflows highlighted institutional sensitivity to geopolitical risk, even as on-chain metrics suggested evolving market structures less reliant on traditional halving cycles.
    Yet, counterbalancing the tumult, state-level initiatives like Texas’s Strategic Bitcoin Reserve signal growing institutional acceptance and a longer-term belief in crypto’s diversification potential. In the weeks ahead, market participants will monitor tariff negotiations, U.S. Treasury yields, and on-chain health indicators to gauge whether this correction is transient or indicative of a deeper shift. For traders seeking new crypto assets and revenue streams, disciplined risk management—particularly around leverage—and a vigilant eye on macroeconomic cues will be essential. Ultimately, the intersection of policy, on-chain dynamics, and institutional adoption will shape whether crypto can emerge from this turbulence and sustain its path toward broader mainstream integration.