Bitcoin prices took a sharp nosedive this past weekend, following President Trump's announcement of new tariffs, resulting in significant turbulence within the cryptocurrency market. The price of Bitcoin fell below the $100,000 mark, closing at as low as $91,441.89, as concerns surrounding inflation spurred by these tariffs set investors on edge. The impact was felt across the crypto board, with Ether dropping by 24% to $2,494.33.
According to data from Coinglass, the immediate aftermath of the announcement saw liquidations soaring to approximately $2 billion. The volatility was not limited to Bitcoin; the entire crypto market cap shrank by about 8%, reflecting widespread panic with many cryptocurrencies experiencing double-digit losses.
On February 3, 2023, President Trump outlined plans to impose substantial tariffs — 25% on imports from Canada and Mexico and 10% on Chinese goods, set to take effect within days. These tariffs were framed by Trump as part of broader initiatives to stem illegal immigration and tackle the opioid crisis, especially involving fentanyl trafficking.
Economists have raised alarms about the potential impacts of these tariffs, warning they could lead to increased consumer costs as businesses may pass on additional expenses. The White House insists these measures will bolster American manufacturing, yet many experts argue they could exacerbate inflation and trigger trade conflicts, leading to dire consequences for both employment and supply chains.
Chris Weston, head of research at Pepperstone, commented on the market reactions: "Crypto is really the only way to express risk over the weekend, and on news like this crypto resorts to a risk proxy." This sentiment resonates particularly as investors perceive potential for economic downturns amid heightened tension surrounding these tariffs.
Interestingly, some analysts believe these new tariffs may inadvertently fuel demand for Bitcoin as individuals seek alternatives due to rising inflation. Jeff Park, from Bitwise Asset Management, stated, "Trump's tariff policies could inadvertently set the stage for a Bitcoin boom." He suggested the tariffs might create conditions favorable for Bitcoin's growth should the U.S. dollar weaken, thereby positioning Bitcoin as a potential hedging asset against inflationary trends.
The cryptocurrency fell sharply as fears of inflation overshadowed any hope for immediate regulation changes under Trump's administration. It’s notable to mention Bitcoin touched record highs of $109,350.72 earlier this year, only to witness about 16% correction since then.
With the political and economic atmosphere being so volatile, Bitcoin traders are closely monitoring $90,000 as the key support level. There are warnings about the possibility of even steeper declines if Bitcoin breaks below this threshold, sparking fears of another 30% pullback characteristic of corrections seen during previous bull runs.
Further complicate the narrative are international responses to the tariffs. Canada and Mexico, as Trump’s top trading partners, vow retaliatory measures, and China has announced intentions to challenge the tariffs at the World Trade Organization, highlighting the potential for long-term trade tensions.
Despite the immediate negative impacts on the cryptocurrency market, some experts envision Bitcoin positioning itself strongly as inflation continues to affect countries worldwide. If such trends provide impetus for depreciation of foreign currencies, it could drive more investors toward Bitcoin as alternative stores of value.
While the current market is volatile, the coming weeks may shed light on whether Trump's tariffs will lead to durable shifts within the cryptocurrency market, possibly leading to higher Bitcoin prices as global economic conditions change. Weston's assertion encapsulates the underlying sentiment: the road may be rough, but the potential for Bitcoin to rise from turmoil remains one to watch closely.