Altcoins During Geopolitical Risks: Why Do They Drop Faster Than Bitcoin

Altcoins are a category of cryptocurrencies that are not Bitcoin and typically exhibit higher volatility. Amid new concerns about American trade tariffs, the cryptocurrency market experienced a significant sell-off, with altcoins showing the most acute reaction. Monday’s events vividly illustrate the classic behavior of investment portfolios during periods of heightened uncertainty: risk aversion, when market participants actively avoid high-risk assets.

Geopolitical Trigger for the Sell-Off

The decline in cryptocurrencies began after statements from U.S. President Donald Trump over the weekend, in which he announced plans to impose a 10% tariff on goods from eight European countries starting February 1, with a subsequent increase to 25% in June if a broader trade agreement is not reached. These announcements created a wave of concern in global markets, pushing investors toward traditional safe-haven assets.

The cryptocurrency market, sensitive to macroeconomic signals, reacted immediately with a decline. However, the scale of the decline varied depending on the asset type. Bitcoin, with the largest market capitalization and liquidity, showed a relatively more moderate movement, falling approximately 2.93% to $87,410. Meanwhile, Ethereum decreased by 4.48% to $2,890.

Why Altcoins Are the Most Vulnerable Assets During Risk Aversion

Altcoins are not only younger and less established projects but also assets with higher beta, meaning they are more sensitive to changes in overall market sentiment. During Monday’s sell-off, Solana dropped more than 5.08%, reaching $119.42. Second-tier altcoins like XRP and DOGE experienced even sharper losses: XRP fell 4.89% to $1.84, and DOGE dropped 5.19% to $0.12 per coin.

This differentiated dynamic reflects a fundamental property of altcoins—they attract speculative capital, which is the first to exit the market when risks emerge. During periods of stability and growth, altcoins often outperform Bitcoin, but in times of destabilization, the situation changes dramatically. Investors seeking to minimize losses shift from high-risk tokens to more liquid and “safe” assets.

Wave of Liquidations and Leverage Reduction

The sell-off was accompanied by a massive wave of liquidations. According to the analytics platform Coinglass, approximately $600 million in long positions in cryptocurrencies were liquidated within 24 hours. Traders actively reduced leverage—that is, the amount borrowed to increase trading volumes—recognizing the need to lower exposure amid rising uncertainty.

Open interest in Bitcoin, reflecting the total volume of open futures contracts, decreased significantly. This indicates that the market is shifting into a more conservative mode, where participants prefer spot positions over derivatives.

Macroeconomic Synchronization of Markets

The decline in cryptocurrencies occurred in sync with the weakening of traditional markets. Futures on U.S. stock indices, including Nasdaq 100 contracts, fell more than 1%, reflecting a broad shift away from risky assets. European index futures also experienced pressure due to renewed concerns about trade wars.

Asian markets showed mixed dynamics with slight losses. The dollar weakened against major currencies, which is a typical reaction ahead of significant trade negotiations or periods of high uncertainty.

Safe-Haven Assets Rise: Gold and Currencies

Alongside the decline in cryptocurrencies, there was a noticeable surge in traditional savings instruments. Gold reached record highs, surpassing $5,500 per ounce, with a nominal increase of about $1.6 trillion in value in one day. Silver also demonstrated significant growth, reflecting overall investor demand for physical precious metals.

The Fear and Greed Index from JM Bullion, indicating market sentiment for precious metals, signals extreme optimism in this segment. Notably, similar indicators for the cryptocurrency market remain in the fear zone, highlighting the difference in risk perception between traditional and digital assets.

Futures on government bonds in European countries also rose in price as investors flocked to time-tested fixed-income instruments. This process is typical during heightened geopolitical risks: capital flows from speculative assets to savings assets.

Bitcoin in the Shadow of Gold: A Narrative Question

Although Bitcoin is often positioned as “digital gold” and a reliable safe-haven asset, the reality presents a different picture. When investors seek protection from macroeconomic risks, they still prefer physical gold and silver over digital tokens. Cryptocurrencies, including altcoins and even Bitcoin, remain closely tied to risk appetite and are traded as high-beta assets sensitive to sentiment shifts.

Altcoins are primarily growth tools in bullish markets, not savings during crises. This explains the differentiated reaction: when investors shift from a “yield-seeking” mode to a “capital preservation” mode, altcoins are the first and most painfully affected.

Market Outlook and Key Levels

Market participants are focusing on the critical support level for Bitcoin around $90,000. The ability of the market to hold this level or, conversely, deepen the correction, will likely be a determining factor for the further dynamics of the entire cryptocurrency category and altcoins in particular.

Currently, cryptocurrency prices remain closely synchronized with global risk sentiment. Any new news about trade negotiations, geopolitical events, or changes in monetary policy will serve as key drivers. Divergence between crypto markets and traditional safe assets will remain a relevant topic as long as macroeconomic uncertainty persists.