Despite a prominent sell-off, long-term projections are held firm by analysts, with Bitcoin forecasted to reach $185,500 before the end of the quarter.
A violent selloff was suffered by the Bitcoin price on Monday, while all-time highs were reached by gold and silver following President Donald Trump’s threat of sweeping new tariffs on European allies.
A real-time stress test for the “digital gold” narrative was delivered by this price performance. While traditional precious metals rallied to new highs on the prospect of geopolitical instability, the largest digital asset buckled.
Bitcoin’s current role in the macro regime is highlighted by this divergence. In “risk-off” events, Bitcoin often behaves like a high-beta liquidity instrument that is sold first as portfolios de-risk, while gold rallies on the uncertainty itself.
Thus, the question for institutional allocators is not whether Bitcoin can be a hedge in the long run, but whether it can be made to act like one during the first hour of a shock when liquidity is king.
US–EU Trade Dispute
An unusually personal political ultimatum regarding Greenland, issued by the US President, was identified as the immediate catalyst for Bitcoin’s price volatility.
A 10% tariff on imports from eight European allies—including Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland—was threatened by Trump to be imposed starting Feb. 1.
A threat was further issued by him to ratchet that rate to 25% by June 1, unless the U.S. demands regarding the territory are agreed to by Denmark.
The approach was condemned by European leaders, and a response that goes far beyond symbolic counter-tariffs began to be prepared by EU officials.
According to the Financial Times, tariffs of 93 billion euros (equivalent to $108 billion) or the restriction of American companies from the bloc’s market are being considered by EU officials.
More important than the euro figure is the toolkit that is being considered by Europe. The EU’s Anti-Coercion Instrument (ACI) can extend beyond goods into services, investment, and procurement.
This represents the kind of escalation that is interpreted by markets as a move from a standard trade dispute toward structural fragmentation.
The backdrop explains why precious metals didn’t merely rise but sprinted higher. It shows that a world where policy risk becomes permanent rather than episodic is being priced in by the markets.
Crypto Market Leverage Unwind
The geopolitical trigger notwithstanding, Bitcoin’s downside was seemingly driven less by a shift in its fundamentals and more by market structure.
Thus, the immediate casualty of the news was the cohort of traders by whom speculation on crypto market prices was conducted via leveraged trades.
Vincent Liu, CIO of Kronos Research, told that the selloff occurred as an “already fragile crypto market” was slammed by geopolitical headlines.
So, as spot prices fell, hundreds of millions in liquidations cascaded through the market. Crowded long positions were wiped out in a textbook example of how mechanical selling can magnify a modest headline move.
Indeed, this view is supported by CoinGlass data, which shows that roughly $525 million in long liquidations were triggered within a single hour. Over a 24-hour period, that figure was seen rising to approximately $790 million.
Bitcoin’s On-Chain Signals
Despite the headline shock, it is suggested by on-chain data that the Bitcoin market has not broken its broader structure.
In a recent report, a BTC market that has shifted from “fear/undervaluation” to a more neutral, equilibrium state was described by crypto research firm Tiger Research.
It was noted by the firm that BTC’s key metrics are currently clustering around fair value, with MVRV-Z at approximately 1.25, NUPL at 0.39, and aSOPR near 1.00.
This is significant because explosive rallies can be produced by fear-driven phases as sentiment snaps back, whereas equilibrium phases tend to be range-bound until a strong catalyst shifts the regime.
Meanwhile, this view of a range-bound market is supported by recent options data.
It was reported by Matrixport that the implied volatility for both Bitcoin and Ethereum has only marginally increased, despite renewed tariff threats from Trump.
In fact, a sharp decline in the volatility of these assets has been observed since mid-November, with a repricing of roughly 18 to 25 volatility points occurring over the past two months.
This significant compression signals that neither the pursuit of gains through options nor the aggressive protection against potential losses is being conducted by traders.
Instead, a more nuanced approach to monetizing volatility in a low-leverage, range-driven market is suggested by their positioning.
What Comes Next for Bitcoin
Moving forward, three potential paths for Bitcoin are being envisioned as the tariff situation evolves.
In a de-escalation scenario over the next two to six weeks, where backchannels soften the stance, it is expected that risk assets could be stabilized.
A post-liquidation recovery would be enabled by this scenario, allowing Bitcoin to move toward the $98,000 mark, although a clean break above that level is likely to require sustained positive flow.
However, a second and more probable path is envisioned where the 10% tariffs take effect between February and April, but with retaliation being contained.
In this case, the $84,000 to $98,000 band may be churned through by Bitcoin, with periodic leverage flushes being triggered by new headlines while no structural breakdown is suffered.
An escalation to 25% tariffs and broader EU measures into June is involved in the third scenario.
If ACI-style pressure is deployed by Europe, a more aggressive repricing of growth may be undertaken by markets, increasing the likelihood that the $84,000 support is tested by Bitcoin, with an overshoot being a potential outcome.
According to Vincent Liu, Chief Investment Officer at Kronos Research, the near-term trajectory of Bitcoin will be determined by structural support levels and derivatives positioning as leverage risks persist. The upcoming Initial Jobless Claims report (Jan 22, 8:30 am ET) was specifically highlighted by Liu as a pivotal event, with the potential for “fresh volatility to be triggered if the balance is shifted by macro signals.”
Meanwhile, it is noted by analysts that even if a stumble is experienced by Bitcoin during the initial shock of a crisis, the asset can still benefit from what follows.
A bullish longer-term projection is maintained by Tiger, with a $185,500 target being set for the first quarter of the year.
“While Bitcoin’s intrinsic value continues to trend higher over the medium to long term. Recent pullbacks appear consistent with healthy rebalancing, and the medium- to long-term bullish outlook remains intact.”
According to the firm:
For now, however, the future is being told by gold in the simplest way: markets are paying up for protection.
While a bright future may be envisioned for Bitcoin, it was shown by this week’s tape that in a sudden macro shock, crypto remains a market that clears leverage first and writes the narrative later.
