Why Are Crypto Prices Down Today?

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Crypto Market Plunge: Trump-Musk Feud Sparks Sell-Off

Crypto prices experienced a significant downturn today. Bitcoin declined to $102,836, a 1.86% decrease in early trading. The price of Bitcoin dipped from $105,000 to below $102,000. Ethereum also saw a substantial drop, falling 6.18% to $2,455.68, according to Coinmarketcap data. Dogecoin experienced a slide of over 7%, reaching $0.175.

Across various derivatives platforms, over $800 million in leveraged long positions were liquidated within a few hours. In total, nearly $1 billion in crypto derivatives were wiped out as prices plummeted.

Investors appeared to be rapidly divesting from riskier assets. The catalyst for this sell-off appears to be a very public disagreement between former President Donald Trump and Tesla CEO Elon Musk.

Their dispute has had ramifications across markets, initiating a wave of sell-offs. This analysis examines the data behind today's downturn, explains the chain reaction across different asset classes, and highlights the potential consequences for overall market stability.

Trump–Musk Feud Impacts Crypto Prices

Earlier this week, Musk criticized Trump’s proposed "One Big Beautiful Bill," labeling it a "corporate straitjacket." Trump responded on June 5th, suggesting the cancellation of federal contracts with Musk's companies, including Tesla and SpaceX.

Musk responded the same day with a series of posts on X, accusing Trump of employing authoritarian tactics. By June 5th, investors were selling off a wide range of assets, from meme coins to large-cap stocks.

Elon Musk's influence on the crypto market is well-known. Dogecoin, a cryptocurrency Musk frequently mentions, fell to $0.175, representing a 7% decrease.

Meme tokens associated with Trump also experienced losses. Trump Coin saw a 12% decrease in value within hours of trading. Brokers reported unusually high sell orders on exchanges like Binance and Coinbase following the Trump–Musk exchange.

Crypto Liquidations Increase as Risk Tolerance Declines

As crypto prices fell, traders using leverage faced swift margin calls. Long positions were most affected, with over $870 million in long positions liquidated within 24 hours across major platforms like Binance, Bybit, and OKX, according to Coinglass data. Short positions fared somewhat better, with approximately $107 million in short-side liquidations, still a considerable loss.

Crypto derivative open interest (OI) decreased by 15% within hours, indicating capitulation among leveraged bulls. Open interest in Bitcoin futures fell from $17 billion to $14.5 billion.

Ethereum futures OI decreased from $11 billion to $9 billion. This forced liquidation intensified the sell-off, as forced selling impacted spot order books and collateral was auctioned off at reduced prices.

The impact extended beyond crypto. Tesla shares fell 15% on June 5th, marking the stock's worst single-day performance since September 2020, resulting in a loss of over $150 billion in market capitalization, according to Yahoo Finance data.

Investors cited Trump's threat to cancel SpaceX and Tesla contracts as a contributing factor. This risk-off sentiment spread to equities associated with Musk.

Bitcoin's price decline to $100,800 represented a 9.9% decrease from its May high of $111,880. Ethereum's drop to $2,455.68 signified an 8.4% retreat from its May 30 peak of $2,680. Even established altcoins experienced losses: Solana down 5%, XRP down 4%, and BNB down 4%.

Broader Implications for Crypto Stability

Today's volatility highlights a growing trend: crypto markets are increasingly susceptible to political events. Influential figures like Musk and Trump now exert significant influence over crypto prices.

When their public disputes become prominent, market participants respond quickly. As the Trump–Musk conflict shows no signs of resolution, markets may remain volatile.

Future tweets or executive actions could trigger further declines. Currently, both crypto traders and traditional investors must navigate a landscape where political events directly affect crypto prices.