The cryptocurrency market is reeling from sharp declines triggered by President Donald Trump’s recent announcement of new trade tariffs, marking the beginning of what some analysts warn could lead to another global trade war.
On February 1, 2025, Trump signed executive orders imposing 25% tariffs on imports from Canada and Mexico and a 10% tariff on goods from China. This aggressive stance sent ripples through traditional markets and triggered panic selling across the crypto space, erasing substantial gains from major digital assets.
Bitcoin, the leading cryptocurrency, witnessed nearly 7% decline, falling to approximately $93,000 after briefly dipping to $91,000. Ethereum, notorious for its volatility, plummeted over 20%, trading below $2,500. Altcoins like Cardano and XRP also suffered severe losses, driving the overall cryptocurrency market down by over 11% within 24 hours.
The turmoil resulted in more than $2.2 billion worth of liquidations across the crypto market, impacting over 728,000 traders. A staggering amount—around $600 million—stemmed from leveraged positions, amplifying the market's volatility during this chaotic period.
Ryan Lee, chief analyst at Bitget Research, discussed the ramifications of Trump’s tariffs, noting, “Retaliatory measures promised by Canada, Mexico, and China have driven investor anxiety, prompting a shift away from riskier assets, including cryptocurrencies.” His insights point to the broader impact of geopolitical tensions on the financial market, especially as crypto has increasingly tied itself to traditional market behaviors.
Canada and Mexico wasted no time announcing their own countermeasures. Canada declared it would impose retaliatory tariffs on American goods worth over $155 billion, and Mexico also indicated it might challenge Trump’s policies with similar measures. China's response remains measured, but officials are reportedly considering actions against the tariffs.
With the U.S. dollar strengthening against other currencies, including the Canadian dollar—which recently plummeted to 22-year lows—the economic instability triggered by these tariffs is already being felt. Analysts suggest the increasing prices of goods due to rising tariffs are poised to dampen consumer spending, leading to potential long-term consequences for investments across asset classes, including cryptocurrencies.
“Higher tariffs are also expected to drive up consumer prices, potentially dampening disposable income and discretionary spending, including investments in digital assets,” cautioned BRN analyst Valentin Fournier. His warning adds to the growing anxiety surrounding the unpredictability of the current economic climate.
Despite the downtrend, some investors regard this volatile market as ripe for investment opportunities. Others, including polarizing finance commentator Robert Kiyosaki, suggest utilizing the downturn as strategic positioning to acquire undervalued assets.
On social media platforms, sentiments range from severe concern to calculated optimism, with many echoing Kiyosaki's assertion: “BRUTAL CRASH HERE NOW... Millions will lose their jobs. This is the best time to get rich.”
The combination of Trump’s aggressive trade strategies and the unpredictability of global responses has exacerbated concerns around market volatility. Reports indicate the aggressive sell-off mirrors events observed during the COVID-19 pandemic and the 2022 FTX market collapse, pointing to the fragility of investors' trust—particularly among newer entrants to the crypto market.
Caroline Bowler, CEO of Australia-based crypto exchange BTC Markets, emphasized the ripple effect of Trump's policies on the cryptocurrency market, stating, “The impacts of Trump’s tariffs are equally being felt in crypto markets, with over $2 billion wiped out.”
While the immediate fallout appears severe, some analysts remain hopeful for recovery as the market types react to news cycles and economic policies. “The historical support for cryptocurrencies amid market downturns suggests investors could pivot back to them once uncertainty declines,” said one analyst, hinting at the cyclical nature of market sentiments.
With Trump’s tariffs setting the stage for prolonged negotiations and tumultuous trade relations, both traditional investors and crypto enthusiasts are left to navigate the uncertainty wrought by potential retaliatory measures and the resulting economic fallout. The crypto market, characterized by its sensitivity to global occurrences, may continue to face challenges, but analysts note the potential for future rebounds as conditions stabilize.