Crypto market shows modest recovery after Trump pulls a TACO

Crypto markets found their mojo after President Trump appeared to hit pause on his tariff threats against eight European nations—this time over Greenland—sending top digital assets modestly into the green.

The episode has revived traders’ favorite acronym, TACO (“Trump Always Chickens Out”), shorthand for the belief that Trump’s toughest talk is often more leverage than law.

Bitcoin (BTC) price rose to $90,232 while Ethereum rose by over 1.3% in the last 24 hours to $3,036.

In his Davos statement, a doddering Trump again insisted that the U.S. will need to take Greenland for its national security. He said that the U.S. will rely on diplomatic channels to address the issue, as he ruled out military options.

Trump also said he “won’t use force,” and is not planning to impose the tariffs he threatened on regional countries on February 1.

“Additional discussions are being held concerning The Golden Dome as it pertains to Greenland. Further information will be made available as discussions progress,” he later posted on Truth Social.

Trump also reiterated his goal of making the US the crypto capital of the world by implementing policies that are friendly to the industry. He cited the GENIUS Act, which focused on the fast-growing stablecoin industry, and the CLARITY Act, which has stalled in the Senate.

Why the crypto market crashed after Trump’s speech 

The crypto market, at first, dipped after Trump’s speech, with the Crypto Fear and Greed Index falling to the fear zone of 32 from this month’s high of 60. Cryptocurrency prices often retreat when market sentiment turns fearful.

The crypto market also took a downturn thanks to a stalled CLARITY Act. The odds of it being signed into law this year fell sharply on the top prediction markets, Polymarket.

Liquidations in the crypto industry also contributed to the ongoing crypto market crash. Data compiled by CoinGlass shows that liquidations rose by 17% in the last 24 hours. 

Bitcoin’s bullish liquidations rose to $345 million in the last 24 hours. Similarly, Ethereum liquidations rose to $277 million. Other top liquidations were coins like XRP, HYPE, and DOGE.

Crypto liquidations happen when exchanges close leveraged positions when losses mount and nears the margin level. A trader can prevent a margin call by adding more money to their positions.

Treasury auctions

The U.S. finances itself by issuing Treasury debt, which is sold through regular auctions to investors around the world. In those auctions, demand determines the interest rate, or yield, the government must pay.

When global investors trust the U.S. economy and its political stability, demand is strong and yields stay low. When confidence wavers, buyers demand higher yields to compensate for the risk. If bids are weak or absent, yields can spike sharply, signaling that U.S. debt is becoming less attractive.

That’s where the danger lies. Large foreign holders such as Japan and Canada wield outsized influence: if they were to sell Treasuries or stop rolling over maturing debt, yields would surge, borrowing costs across the economy would jump, and financial markets could seize up. In a worst-case scenario, the U.S. would struggle to fund itself, threatening the foundations of the global financial system.

Those concerns are no longer theoretical. For example, Swedish pension giant Alecta has been selling most of its U.S. Treasury holdings, citing increased risk and unpredictability in U.S. politics—an early warning sign that some long-term investors are reassessing whether U.S. debt is still a safe bet.

So what?

If foreign demand for U.S. Treasuries weakens, yields rise as a stress signal, which historically supports Bitcoin’s role as a hedge against sovereign risk rather than as a risk asset.

Public doubts from pension funds about U.S. policy or fiscal stability reinforce crypto’s appeal as a non-sovereign store of value, even if reallocations are small.

Any marginal shift toward alternatives like gold or inflation hedges can be meaningful for digital assets given their smaller market size. A softer dollar tied to weaker Treasury demand would further support Bitcoin and, to a lesser extent, Ethereum.