President Donald Trump's aggressive tariff threats against key European NATO allies over the disputed Greenland issue unleashed chaos across global financial markets this week, with cryptocurrency prices plunging dramatically and erasing early 2026 gains. Bitcoin tumbled below $92,000 from highs near $97,000, while the total crypto market cap shrank by over $200 billion to around $3.1 trillion in a single day, fueled by panic selling and massive leverage unwinds.

Tariff Trigger and Market Carnage

Trump's January 17 announcement imposed a 10% tariff on imports from eight nations—Denmark, UK, France, Germany, and others—effective February 1, escalating to 25% by June unless Greenland concessions were met, sparking fears of a full-blown US-EU trade war. This rattled equities first, with the S&P 500 down 2.1%, Dow 1.8%, and Nasdaq 2.4% on Tuesday, before crypto amplified the rout as risk appetite evaporated.

Liquidation Avalanche Hits Hard

Over $870 million in leveraged positions liquidated rapidly, dominated by $768 million in long bets on Bitcoin and altcoins, with Hyperliquid absorbing $241 million and Bybit $220 million in forced closures. Ethereum dropped 5% to under $3,500, XRP shed 5% to $1.89—down 20% from its $2.40 January peak—while most top 100 coins bled 9-20%, pushing the Fear & Greed Index to a fearful 32.

Institutional Pullback Deepens Pain

US spot Bitcoin ETFs saw $483 million in outflows on January 20, led by Grayscale ($161M), Fidelity ($151M), and BlackRock ($57M), with Ethereum ETFs losing $230 million amid waning institutional confidence. Analysts like Sean Dawson of Derive.xyz called the mood "mildly bearish through mid-year," citing geopolitical jitters making crypto more risk-averse than past cycles.​

Sudden Reversal Sparks Partial Rebound

By Wednesday, Trump suspended tariffs after securing a "framework deal" on Greenland with NATO's Mark Rutte, lifting equities but leaving crypto subdued—Bitcoin hovered near $92,000 as altcoins lagged recovery. Debates rage on whether this flash crash signals a prolonged "crypto winter" or just macro noise, echoing 2025's tariff volatility.