Bitcoin has witnessed significant volatility recently, with its price falling below $100,000 following U.S. President Donald Trump’s announcement of new tariffs on imports from Mexico, Canada, and China. On February 1, Trump signed the executive order, which sparked reactions across financial markets, particularly affecting riskier assets such as cryptocurrencies.
Following the new tariffs, Bitcoin dropped below the $100,000 mark to reach $99,111, marking its first decline below this threshold since January 27. The announcement included additional tariffs of 25% on goods from Canada and Mexico, and 10% on those from China, aiming to encourage enforcement against illegal immigration and drug trafficking.
Canadian Prime Minister Justin Trudeau swiftly retaliated, declaring at a press conference on February 3, "We will impose 25% tariffs on $10.65 billion worth of U.S. products." This countermeasure seemed to dampen investor enthusiasm, leading to Bitcoin’s decline, which was noted to have fallen at one point to around $94,476, its lowest level since mid-January. CoinMarketCap reported the cryptocurrency trading at $99,540 at the time of writing.
The market's reaction was immediate and severe, with CoinGlass data showing approximately $22.7 million worth of long positions liquidated before this weekend. Analysts and traders are expressing divided opinions on the long-term effects of such tariffs on the cryptocurrency markets. Dan Gambardello, founder of Crypto Capital Venture, expressed skepticism, stating, "Trump's tariffs and his meme coin have apparently ended the bull market, which is shocking to me." Meanwhile, some see potential benefits arising from prolonged tariffs.
Jeff Park, Chief Strategy Officer at Bitwise Invest, suggested, "A prolonged trade war could have fantastic results for Bitcoin long term," emphasizing the potential for Bitcoin's resilience against inflation resulting from these additional tariffs. Conversely, Adam Cochran, partner at Cinneamhain Ventures, noted the cryptocurrency's vulnerability, saying, "Bitcoin is not independent from the world market, and we are likely to see overall struggles as we have economic pressures of this scale."
With the backdrop of these developments, many investors are feeling skittish. On February 3, Bitcoin continued its downward trend, closely correlational with the economic pulse of global markets affected by tariff wars.
The overall sentiment among market analysts has shifted. Chris Weston, head of research at Pepperstone, pointed out, "The only way to reflect risk this weekend was through cryptocurrencies, indicating this as the market's immediate risk reflective asset amid uncertain political terrains and economic forecasts."
This political drama surrounding trade relations is likely to continue influencing crypto prices as international responses evolve. The uncertainty around how long these tariffs will last and how significantly they will affect inflation remains to be seen.
Investor sentiments have also shifted as many hoped for regulatory measures from Trump to support cryptocurrencies, which so far have not materialized since his presidency began. Many are left disappointed due to his lack of substantial regulatory achievements to bolster the crypto market, even though he heavily promoted cryptocurrency advocacy during the election campaign.
Overall, the cryptocurrency market's response to Trump's tariff announcement underlines the fragility of digital currencies amid broader economic forces. Whether these tariffs lead to more considerable acceptances or hardships for Bitcoin remains subject to the global economic narrative as countries like Canada and Mexico retaliate against U.S. trade policies.