Market Turmoil: Over 100,000 Crypto Positions Liquidated Amid U.S. Fiscal Concerns

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The global financial landscape saw sharp volatility on July 2, as escalating concerns over U.S. fiscal policy triggered a wave of risk-off sentiment across both traditional and digital asset markets. Bitcoin briefly dropped more than 1.5%, Ethereum fell over 3%, and altcoins like Cardano plunged more than 5%. The turbulence led to over 101,000 contract liquidations within 24 hours, with total losses exceeding $261 million, according to CoinGlass data.

While crypto prices partially recovered in afternoon trading—Bitcoin rebounding to $107,700 and Cardano turning slightly positive—the broader market remains on edge. Investors are closely watching upcoming U.S. economic data and legislative developments that could shape the trajectory of risk assets in the coming weeks.

Sharp Market Moves Trigger Widespread Liquidations

Cryptocurrency markets experienced significant intraday swings, with Bitcoin shedding over **$2,000** at one point before staging a recovery. At noon, BTC traded around $105,600, down 1.49%, while Ethereum dipped 3.3%. Major altcoins including Dogecoin, Solana, Cardano, and XRP all registered losses exceeding 4%.

However, by evening hours, the market stabilized. Bitcoin climbed above $107,700—a 1% gain—while Ethereum and XRP narrowed their declines to less than 1%. Cardano edged into positive territory, signaling short-term resilience despite earlier panic.

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The most alarming figure came from derivatives data: over 101,000 traders were liquidated in the past 24 hours. Total liquidation volume reached $261 million**, with long positions absorbing the brunt—**$184 million in longs vs. $76 million in shorts**. The largest single liquidation occurred on Bybit’s BTCUSD futures contract, valued at **$2.6 million, underscoring the risks of leveraged trading during high-volatility events.

"Big Beautiful Bill" Sparks Fiscal Fears

The catalyst for the sell-off appears to be the U.S. Senate's passage of the so-called "Big Beautiful" tax and spending bill on July 1. Approved by a narrow 51–50 vote, the legislation aims to extend Trump-era tax cuts from 2017, exempt tips and overtime pay from federal income tax, slash funding for Medicaid and nutrition programs, and increase spending on immigration enforcement and defense.

Although the bill must return to the House for final approval—potentially by July 4—it has already ignited concerns about America’s fiscal sustainability.

The Congressional Budget Office estimates that the Senate version would add $3.3 trillion to the U.S. deficit between 2025 and 2034**, compared to $2.8 trillion under the House version. Additionally, changes to Medicaid and the Affordable Care Act could leave nearly 12 million more Americans uninsured by 2034**.

Investors reacted swiftly, selling off risk assets. Japan’s Nikkei 225 dropped over 1%, South Korea’s KOSPI briefly fell nearly 2%, and Nasdaq 100 futures turned negative after an initial rally.

Vincent Liu, Chief Investment Officer at Kronos Research, noted:

“Crypto markets are in a cooling consolidation phase. Liquidity remains thin, and investors are adopting a wait-and-see stance ahead of key macro data releases.”

Nick Ruck, Director at LVRG Research, added:

“Bitcoin’s drop reflects pre-data caution, amplified by fears over rising deficits and policy uncertainty stemming from the ‘Big Beautiful’ bill.”

Sector-Wide Fallout in Digital Asset Equities

The ripple effects extended beyond crypto prices. U.S.-listed crypto-related stocks declined sharply on Tuesday:

These moves reflect growing sensitivity among institutional investors to macroeconomic signals and regulatory sentiment in Washington.

Investor Sentiment: Caution Dominates

Despite partial price recovery, market sentiment remains fragile. Several factors are contributing to this cautious outlook:

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FAQ: Understanding the Market Shakeout

Q: What caused the sudden crypto market drop on July 2?
A: The decline was primarily driven by investor concerns over the U.S. Senate passing the "Big Beautiful" tax and spending bill, which raised fears of increased fiscal deficits and macroeconomic instability.

Q: How many people were liquidated in the recent market move?
A: Over 101,000 traders faced liquidation in the past 24 hours, with total losses exceeding $261 million—mostly from leveraged long positions.

Q: Why did Bitcoin recover after the initial drop?
A: After the initial panic sell-off, some traders saw value at lower price levels. Improved market depth and short-term buying pressure helped stabilize prices.

Q: Is this level of volatility normal for crypto markets?
A: While crypto is inherently volatile, events tied to macroeconomic policy—especially U.S. fiscal and monetary decisions—can amplify price swings due to high leverage and speculative positioning.

Q: Could the tax bill impact crypto regulation?
A: While not directly targeting digital assets, the bill’s focus on budget cuts and deficit expansion may influence future regulatory funding or tax treatment of crypto gains.

Q: What should traders watch next?
A: Key indicators include U.S. jobless claims data, Fed commentary, progress of the tax bill in the House, and on-chain metrics like funding rates and open interest.

Strategic Takeaways for Market Participants

This episode highlights several enduring truths for digital asset investors:

  1. Macro matters more than ever – Crypto is no longer isolated from traditional finance; fiscal and monetary policies have direct impacts.
  2. Leverage is a double-edged sword – High-margin trading can magnify gains but also lead to rapid liquidations during volatility.
  3. Sentiment drives short-term flows – News-driven fear or optimism can override technical levels in thin markets.
  4. Diversification remains key – Allocating across asset classes helps mitigate exposure to sudden policy shocks.

As markets await further clarity on U.S. fiscal direction, many traders are adopting defensive postures—reducing leverage, increasing cash reserves, and focusing on risk management.

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