Crypto Liquidation: Bitcoin Tumbles Below $73k, Erasing 'Trump Trade' Gains

The cryptocurrency market faced a violent correction on Tuesday, with Bitcoin (BTC) plunging nearly 8% to trade below $73,000, marking its lowest level since Donald Trump's return to the White House. The move effectively wipes out the entire “Trump premium” that had built up since November, signaling a total unwind of the speculative fervor associated with the new administrations pro-crypto rhetoric.

Market Data & Liquidity Crisis

The sell-off was broad-based, highlighting a distinct lack of liquidity further out on the risk curve:

• Altcoin Capitulation: Ethereum (ETH) dropped over 10% to levels not seen since May 2025.
• Small-Cap Collapse: The MarketVector Digital Assets 100 Small-Cap Index has collapsed nearly 70% over the past year.
• Leverage Washout: A failed attempt to bounce off $80,000 triggered a cascade of long liquidations.
• ETF Outflows: Spot ETFs saw billions in outflows in November, indicating retail capitulation.

Institutional Flows and 'Crypto Winter'

The crash coincided with a broader risk-off tone in global markets. Matt Hougan, CIO of Bitwise, characterized the current environment as a “full-blown, 2022-style Crypto Winter,” rather than a mere bull market correction.

However, Hougan noted that such capitulation phases often precede a cyclical bottom, potentially within weeks. For Forex traders, the collapse in crypto serves as a leading indicator for liquidity drying up in speculative corners of the market, often preceding weakness in commodity currencies.