Crypto Market Sees Volatile Reactions Following U.S.-China Tariff Announcements
XRP and Dogecoin Experience Initial Gains Before Retreating Amid Economic Tensions
February 4, 2025, 7:59 a.m. UTC
In a turbulent turn of events for the cryptocurrency market, major tokens such as XRP and Dogecoin surged by as much as 20% within a 24-hour period, only to reverse those gains as economic tensions between the U.S. and China escalated. The spike in prices followed a significant liquidation event on Monday, where traders capitalized on a ‘buy-the-dip’ strategy to recoup losses from an earlier slump.
The recent volatility is linked to former President Donald Trump’s announcement of tariffs on imports from Canada, Mexico, and China. This decision triggered a steep drop in Bitcoin and broader equity markets, shifting investor sentiment away from crypto’s typically bullish narrative and placing it squarely on the immediate economic repercussions of these trade disputes.
Market Dynamics Amid Tariff Turmoil
In the wake of the tariff announcements, cryptocurrency prices began to rise, but that momentum quickly waned during the Asian morning hours when the deadline for additional tariffs on China passed without reaching an agreement. XRP, along with other cryptocurrencies such as Solana’s SOL and Cardano’s ADA, saw a modest increase of nearly 3%. Bitcoin (BTC) and Ether (ETH) also recorded gains nearing 4%.
Despite this initial trading surge, analysts warned that the U.S.-China tariff conflict could dampen investor appetite for risk assets, including cryptocurrencies. Ben El-Baz, Managing Director of HashKey Global, expressed concerns regarding the possible long-term effects of these retaliatory tariffs. ‘The damage from the tariffs could still be made temporary if more crypto-friendly policies in the U.S. are set in motion,’ he stated.
However, traders’ opinions on the enduring impact of China’s response remain varied. Some market watchers believe that the tariffs could signal the onset of prolonged trade tensions, particularly as Trump’s administration has historically targeted China as a focal point of its trade rhetoric.
Understanding the Broader Implications
Despite growing recognition of Bitcoin as a ‘digital gold,’ its trading patterns still align closely with risk assets. Min Jung, a research analyst at Prestro Research, highlighted the pressure that market dynamics exert on cryptocurrencies, noting that the latest tariff developments have created an environment of heightened volatility. ‘While today’s initial reaction may have been an overreaction, the key question now is whether this move is primarily a negotiation tactic or if it signals the start of a prolonged trade conflict,’ Jung added.
Monday’s trading events also saw a surge in interest towards dollar-backed stablecoins, as traders sought refuge from potential economic instability and currency fluctuations induced by the tariff-induced uncertainty.
Outlook for the Crypto Market
The imposition of tariffs could lead to retaliatory measures from the affected countries, potentially igniting a broader trade conflict that may further destabilize the cryptocurrency market in the near future. Investors are now closely monitoring the situation, assessing the balance between negotiation possibilities and the risk of escalating tensions.
As the market digests these developments, professionals in the field will be observing for signs of recovery or further decline, as the landscape remains unpredictable.
About the Contributor
Shaurya Malwa serves as the Co-Leader of the CoinDesk tokens and data team in Asia, focusing on various factors influencing the crypto derivatives market, decentralized finance (DeFi), market microstructures, and protocol analysis. He actively engages with numerous cryptocurrencies and liquidity pools across various platforms, making him well-acquainted with the commercial intricacies of the crypto-ecosystem.
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