Cryptocurrency Prices Plummet Amid Trade War Concerns
SINGAPORE/PARIS, Feb 3 (Reuters) – Cryptocurrency markets experienced significant turbulence on Monday, as overall prices dropped sharply coinciding with rising fears of a potential trade war. Bitcoin, the largest cryptocurrency by market capitalization, reached a three-week low during overnight trading.
Bitcoin, which serves as a barometer for the crypto market, fell to a low of $91,441.89 before stabilizing at $95,730.35 by 09:41 GMT, marking a decline of 6.2% for the day. Meanwhile, ether, another major player in the crypto space, saw a staggering drop of nearly 25% since Friday, its largest three-day loss since November 2022, bringing its price to $2,592.14.
Tariffs Trigger Market Fears
The recent decline in cryptocurrency prices can be largely traced back to recent trade policy shifts from the United States. Over the weekend, President Donald Trump announced the imposition of tariffs, including a 25% levy on imports from Mexico and Canada, and a 10% tariff on goods from China, set to take effect on Tuesday. This move galvanized immediate backlash, with Canada and Mexico promising retaliatory measures and China announcing plans to contest the tariffs at the World Trade Organization.
With these developments, a cascade of sell-offs swept through financial markets, triggering a corresponding decline in cryptocurrency values. Data from CoinGecko indicates that almost a quarter of the 100 largest cryptocurrencies plummeted by 20% or more within a single day.
Shares of Coinbase, a prominent U.S. cryptocurrency exchange, reflected this downturn, dropping by 5.5% in pre-market trading. President Trump’s own cryptocurrency, $TRUMP, also fell below the $20 mark, a stark contrast to its earlier highs above $73 shortly after its launch.
Market Reactions and Investor Sentiment
Market experts noted that the cryptocurrency sector has been highly sensitive to broader market sentiments recently. “Crypto is really the only way to express risk over the weekend, and on news like this crypto resorts to a risk proxy,” said Chris Weston, head of research at brokerage firm Pepperstone.
Bitcoin’s decline has been comparatively milder than that of ether, a trend attributed to its perception as a ‘risk-off asset,’ similar to gold. Joseph Edwards, head of research at Enigma Securities, noted that bitcoin’s resilience is relative; he pointed out that ether is simply easier to liquidate in times of market stress, leading to a more pronounced decline for it.
Disappointment in Market Recovery
Additional pressure has compounded the fall in cryptocurrency valuations, especially after a robust rally following Trump’s election. Investors had high hopes for immediate changes to cryptocurrency regulations and policies, which have not yet materialized. Bitcoin, for instance, touched a record high of $107,071.86 on January 20, shortly after Trump took office, buoyed by expectations of more favorable crypto regulations.
While Trump’s initial rhetoric hinted at a more accepting stance towards digital assets—having previously dubbed cryptocurrencies a scam—there has been some disappointment among investors regarding the lack of tangible support for the crypto sector.
Paul Howard, senior director at crypto market-maker Wincent, reflected on the mixed sentiments. Some investors had anticipated government initiatives such as the purchase of bitcoin to bolster the asset’s stability. Nevertheless, he expressed confidence in the long-term growth of the cryptocurrency market. “The organic growth we anticipate over the coming years, due in part to a more friendly U.S. administration, will likely outweigh the short-term volatility and macroeconomic concerns over tariffs in the next few weeks,” he stated.
Conclusion
As the cryptocurrency market grapples with these significant developments and fluctuating investor confidence, many eyes will remain on both market trends and the evolving landscape of U.S. trade policies in the days to come.
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