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The Trump Trade War is causing havoc in the global markets, and the crypto market is no exception. If you thought crypto was a rollercoaster before, buckle up—because Ethereum (ETH) just took a nosedive that left investors reeling in the aftermath of the Trump Trade War, the US media reported on Monday.
On February 3, 2025, ETH plummeted 24%, marking its biggest single-day drop in years. And what triggered this chaos? A renewed Trump trade war, courtesy of the US President, which sent shockwaves through both crypto and traditional financial markets.
So, what the heck happened? And more importantly, what’s next for Ethereum and the broader market? Let’s see how Trump trade war is causing havoc to the global financial markets.
Ethereum’s Sudden Price Collapse: What Went Down?
In just a few hours, Ethereum tanked from $3,285 to as low as $2,065 on Deribit. Other major exchanges reported similar carnage:
📉 Kraken: ETH hit $2,127
📉 Coinbase: ETH dropped to $2,150
This was Ethereum’s worst decline since May 19, 2021, wiping billions from the market. Even Bitcoin (BTC) wasn’t spared, falling over 5% to $91,200.
Where ETH Crashed the Hardest
| Exchange | Lowest ETH Price |
|---|---|
| Deribit | $2,065 |
| Kraken | $2,127 |
| Coinbase | $2,150 |
But that’s not all. The entire crypto market bled trillions in value, with altcoins tanking between 15-30%.
So, what’s behind this Ethereum bloodbath?
The Trigger: Trump Trade War Escalation Hits Crypto Markets
Blame it on tariffs due to the Trump trade war.
Over the weekend, President Donald Trump slapped fresh tariffs on Canada, Mexico, and China:
🔹 25% on imports from Canada and Mexico
🔹 10% on Chinese goods
Investors panicked, fearing that these tariffs would fuel inflation, shake up global markets, and force central banks to halt interest rate cuts. And when Wall Street sneezes, crypto catches a cold—causing this massive sell-off.
📉 Dow Jones Futures dropped 650+ points
📉 European stock markets plunged
📉 The U.S. Dollar surged as investors fled to safety
Ethereum Volatility Goes Ballistic: The 184% Surge
Ethereum is no stranger to volatility, but this was next-level insanity in the backdrop of Trump trade war.
One-day at-the-money (ATM) volatility on ETH jumped from 34% to 184%—an explosive surge in just hours.
The ETH DVOL index, which measures expected volatility for the next month, spiked past 100%.
That means traders were bracing for more wild price swings.
Traders Rushed for “Put” Options to Protect Themselves
As the market spiraled due to the Trump trade war, investors scrambled to buy ETH put options—contracts that profit when ETH drops.
📈 Put-Call Ratio Soared: Jumped from 0.6 to 2.5, meaning way more traders were betting on further downside.
📈 Risk Reversals Hit -10%: That’s a rare and extreme signal favoring puts over calls.
Translation? People were hedging like crazy, expecting more pain ahead.
Market Makers Pulled Liquidity, Making Things Worse
Usually, market makers provide liquidity, ensuring smooth trading. But during extreme volatility, they pulled back—which only made the crash worse.
Griffin Ardern, head of options trading at BloFin, explained:
“Some market makers chose to withdraw liquidity under high volatility, and their risk-averse behavior affects options pricing.”
Simply put, when liquidity providers back away, prices drop faster, and panic selling intensifies. The Trump trade war further intensified it.
Liquidations: The $2 Billion Crypto Meltdown
The ETH price collapse triggered a liquidation tsunami across the market.
💀 Over $2 billion in leveraged positions were wiped out in 24 hours following the Trump trade war.
💀 ETH margin traders got obliterated, forced to sell at fire-sale prices.
Here’s how it went down:
1️⃣ ETH price falls → Margin calls triggered
2️⃣ Traders can’t meet margin → Exchanges sell their ETH
3️⃣ Forced selling drives prices lower → More liquidations → More panic
And just like that, the market unraveled in real-time.
Traditional Markets Got Wrecked, Too
Crypto wasn’t the only victim. The stock market, forex, and commodities all took a beating after the Trump trade war:
📉 Dow Jones Futures: -650 points
📉 S&P 500: Down over 2%
📉 European Stocks: Declined sharply
📉 Australian Dollar: Hit pandemic-era lows
📉 Gold: Spiked as investors sought safe-haven assets
The U.S. Dollar Index surged, proving once again that during economic turmoil, money flees to the greenback—bad news for crypto bulls.
What’s Next for Ethereum? Will It Recover?
So, after all this madness, what happens next?
🔹 Bullish Case: If ETH holds key support levels and inflation fears cool down, we could see a strong rebound.
🔹 Bearish Case: If economic uncertainty persists, ETH could retest $2,000 or lower before bouncing back.
Sydel Sierra, a digital wealth analyst, advises:
“It’s crucial to see the bigger picture and not get swayed by short-term fluctuations.”
Translation? Don’t panic sell. Smart money buys the dip.
Ethereum Freefall: What’s Next?
Ethereum’s 24% price crash on February 3, 2025, was one of the most brutal sell-offs in years. The drop wasn’t just another day in crypto—it was a perfect storm of economic panic, soaring volatility, and market distortions that left traders and investors scrambling. Everybody only had one thing in mind: Trump trade war.
Why not? At the heart of the meltdown was President Donald Trump’s tariff bombshell, which shook global markets to their core. With new 25% tariffs on Canada and Mexico and 10% on Chinese imports, fears of inflation and economic instability spiked, triggering a risk-off sentiment that extended far beyond crypto. Investors dumped ETH and other digital assets, opting for safer investments like the U.S. dollar and gold.
The sheer scale of the panic was reflected in Ethereum’s volatility metrics. ETH’s one-day at-the-money (ATM) volatility surged from 34% to 184%, while its DVOL index shot past 100%, signaling wild swings ahead. Traders rushed for downside protection, flooding into put options, which caused the put-call ratio to spike above 2.5—a strong indicator that many were betting on further declines.
But the situation worsened when market makers pulled liquidity, amplifying the sell-off. These key players typically stabilize markets by providing buy and sell orders, but when they step back, the bids disappear, and prices crash even harder. The lack of liquidity combined with panic selling created a snowball effect, accelerating ETH’s downward spiral.
Adding to the chaos, over $2 billion in leveraged positions were wiped out. Liquidations forced traders to sell their ETH at rock-bottom prices, fueling even more downward momentum. With cascading margin calls, ETH dropped below key support levels, leaving investors wondering if the worst was over—or if another leg down was coming.
The Final Word
So, what happens next? Ethereum has historically bounced back from major sell-offs, and its fundamentals remain strong. If market conditions stabilize and inflation fears subside, ETH could see a sharp recovery in the coming months. But if the Trump trade war intensifies and macroeconomic pressures mount, the road to recovery could take longer.
For now, investors should stay cautious, monitor key support levels, and avoid panic-driven decisions. The market may be down, but as history has shown, crypto always finds a way to bounce back.
FAQs: Ethereum’s Price Crash & What Comes Next
1️⃣ Why did Ethereum drop 24% on February 3, 2025?
ETH crashed due to Donald Trump’s new tariffs, which sparked economic fears and a crypto market sell-off.
2️⃣ What is the ETH DVOL index, and why does it matter?
ETH DVOL measures expected price turbulence over four weeks. It spiked past 100%, meaning traders expect wild swings ahead.
3️⃣ How does Trump trade war impact crypto?
Tariffs can increase inflation, leading to higher interest rates, which make crypto less attractive to investors.
4️⃣ What’s the put-call ratio, and why did it hit 2.5?
It shows how many traders are betting against ETH. A ratio above 2.5 means traders expect more downside.
5️⃣ Will Ethereum recover from this drop?
Historically, ETH bounces back after major dips. If market conditions stabilize, we could see a strong rebound.
6️⃣ Should I sell my Ethereum now?
Selling in panic is rarely a good idea. If you believe in Ethereum’s long-term value, holding or buying the dip may be smarter.
7️⃣ How low could ETH go before it recovers?
If economic uncertainty persists, ETH could retest $2,000 before reversing course.
References:
Coindesk – Coindesk Website
FX Empire – FXEmpire Website
Forbes – Forbes Website
DL News – DLNews Website
