The cryptocurrency market is reeling following recent announcements from U.S. President Donald Trump introducing new import tariffs on China, Canada, and Mexico, sending shockwaves throughout the finance sector. Major cryptocurrencies, including Ethereum and Ripple, have experienced sharp declines, leading to fear and volatility among investors.
On February 3, Ethereum, the second-largest cryptocurrency by market capitalization, plummeted by 16% within just one hour, dropping to $2,368. Fortunately for investors, Ethereum rebounded slightly to $2,521, but this figure still reflects a staggering 38% decrease from its December 2024 peak of $4,078, shortly after the last presidential election.
Concurrently, other significant altcoins like Avalanche, Ripple, Chainlink, and Dogecoin suffered losses exceeding 20% within the same time frame. This rapid decline highlights the principle of panic selling among investors, driving the total cryptocurrency market cap down by 11.4% to $3.17 trillion, according to CoinGecko data.
Analysts are warning of the market's new normal. Markus Thielen, founder of 10x Research, noted, “The sharp decline of altcoins reflects a wave of stop-loss triggers coupled with lack of buyers among retail investors,” emphasizing the decreasing interest and conviction within the investor community. He suggested the initial waves of Trump’s tariffs were not factored fully by market participants, as they were preoccupied with other recent news, leaving investors to react hastily to the unexpected announcement.
Thielen cautioned about the likelihood of “prolonged uncertainty” affecting market stability, which emphasizes the importance of trading strategies for cryptocurrency investors. The performance of U.S. stock markets on February 3 could largely dictate whether current support zones for cryptocurrencies hold strong.
This downturn was echoed across other financial markets, with the Nasdaq 100 futures dropping nearly 2.7%, and the S&P 500 and Dow Jones Industrial Average futures declining by 2% and 1.5%, respectively. Even the Crypto Fear & Greed Index showed marked anxiety, plunging 16 points to land at 44 out of 100 — its lowest score since October 11.
Bitcoin, often regarded as 'digital gold', also felt the impact, albeit slightly less severe than its altcoin counterparts, with prices falling by 6.8% to around $94,743. Interestingly, this drop led to Bitcoin's market dominance rising from 61.1% to 64%. Thielen remarked, “An increasing Bitcoin dominance without a corresponding rise of the total crypto market suggests risk-averse traders are stepping away from altcoins and retreating to Bitcoin.”
Meanwhile, other digital assets are faring poorly as well. For example, Ripple's price dropped 1.05% over the last 24 hours, struggling to maintain even with some monthly growth. Despite Ethereum hovering close to overbought conditions and showing signs of potential recovery, it is still beneath the previous peak. The current analysis indicates Ethereum could head back to $3,300 if bullish momentum returns, yet risks falling to around $3,000 should selling pressure continue.
Market watchers are left with various questions as they navigate these turbulent times. Many wonder what upcoming trends could shape the cryptocurrency space, especially with the return of the bull market potentially leading to new highs or stabilizing conditions.
Looking forward, analysts believe attention should focus on the potential regulatory environment and the growth of decentralized finance (DeFi) and non-fungible tokens (NFTs), strategies for investing, and risk management. With changes on the horizon, both retail and institutional investors should remain attentive to developments affecting their positions.
While investor sentiment remains bleak and trading volumes dip to reflect uncertainty, it is important for traders to maintain effective strategies. Remaining informed and agile may prove to be the best course forward amid instability.