Trump's Tariff Cancellation Sparks Bitcoin Liquidity Grab Amid Extreme Fear

VADODARA, January 21, 2026 — President Donald Trump's announcement to cancel tariffs scheduled for February 1 has injected volatility into global markets, with Bitcoin's price action revealing a classic liquidity grab above the $90,000 psychological level. This daily crypto analysis examines how geopolitical de-escalation interacts with extreme fear sentiment to create asymmetric trading opportunities. According to Walter Bloomberg, the decision followed a meeting with NATO Secretary General Mark Rutte, where Trump cited a framework agreement regarding Greenland as the catalyst.

Market Context & Background

Market structure suggests tariff threats have historically acted as negative beta events for cryptocurrency valuations, correlating with dollar strength and risk-off flows. The scheduled February 1 tariffs represented a 15% ad valorem duty on approximately $300 billion in imported goods, a measure that would have tightened global liquidity conditions. Consequently, their removal reduces immediate pressure on the Federal Reserve's monetary policy trajectory, potentially delaying quantitative tightening cycles. Underlying this trend is the persistent divergence between Bitcoin's on-chain accumulation metrics and retail sentiment indicators, a pattern last observed during the 2023 banking crisis. Related developments in this regulatory include Bitcoin's recent breach of the $90k barrier despite extreme fear readings and conflicting institutional forecasts about all-time highs.

What Happened?

On January 21, 2026, President Trump formally announced the United States would not implement tariffs previously scheduled to take effect on February 1. The official statement, disseminated through Walter Bloomberg's reporting channels, indicated the decision resulted from diplomatic negotiations with NATO leadership, specifically citing a "framework for a future agreement regarding Greenland" established during discussions with Secretary General Mark Rutte. This geopolitical development immediately impacted forward-looking inflation expectations, with 5-year breakeven rates adjusting downward by 8 basis points in the hour following the announcement. Market analysts interpret this as a reduction in trade war premium priced into risk assets.

Technical Analysis & Price Action

Bitcoin's price reaction to the news created a clear Fair Value Gap (FVG) between $89,200 and $90,100 on the 4-hour chart, a zone that now acts as immediate support. Volume profile analysis indicates significant absorption at the $90,000 level, suggesting institutional participation rather than retail FOMO. The Relative Strength Index (RSI) on daily timeframes remains at 58, avoiding overbought territory despite the rapid appreciation. Critical moving averages show the 50-day SMA at $86,500 and the 200-day SMA at $82,000, with Bitcoin currently trading 4.1% above its volume-weighted average price. Market structure suggests the move represents a liquidity grab above the weekly order block at $91,800, targeting stops above the psychological $92,000 resistance. The bullish invalidation level sits at $87,200 (the 20-day exponential moving average), while bearish invalidation occurs above $92,500 (the weekly order block high).

By The Numbers

Why It Matters

For institutional portfolios, tariff cancellation reduces correlation between Bitcoin and traditional risk-off assets, potentially enhancing its diversification properties during geopolitical volatility. The Federal Reserve's reaction function now faces reduced pressure to maintain hawkish rhetoric, as outlined in their latest monetary policy calendar. This creates favorable conditions for yield-seeking capital to rotate into digital assets. For retail participants, the extreme fear sentiment reading of 24/100 contradicts the positive fundamental development, indicating potential mispricing. Market structure suggests this divergence often precedes rapid mean reversion, particularly when liquidity conditions improve. The removal of trade barriers specifically benefits cryptocurrency mining operations reliant on imported hardware, reducing operational costs by approximately 3-5% according to industry estimates.

Community Sentiment

Market analysts on X/Twitter highlight the technical significance of Bitcoin holding above $90,000 despite extreme fear metrics. One quantitative researcher noted, "The FVG created by this news event will either be filled for a continuation or serve as springboard for a gamma squeeze above $92k." Another observer pointed to on-chain data indicating accumulation by entities holding 100-1,000 BTC during the announcement window. Bulls emphasize the reduction in macro uncertainty, while bears caution about potential "sell the news" behavior given overextended short-term momentum indicators.

Price Prediction / Future Outlook

Bullish Case: If Bitcoin sustains above the $90,100 FVG support, market structure suggests a test of the $92,500 weekly order block. A breakout above this level could trigger a gamma squeeze toward $95,000, particularly if the extreme fear sentiment reverses rapidly. This scenario assumes continued institutional inflow as measured by Coinbase premium indicators and a stabilization in global dollar liquidity conditions.

Bearish Case: Failure to hold the $89,200 FVG low would invalidate the bullish structure, likely leading to a retest of the $87,200 20-day EMA. A break below this level could accelerate selling toward the $85,000 volume node, especially if geopolitical tensions reemerge or inflation data surprises to the upside. This scenario would confirm the extreme fear reading as predictive rather than contrarian.