Cryptocurrencies are experiencing a significant downturn, with Bitcoin dropping nearly 6% and Ether plummeting 26%, the largest decline since 2021. This turmoil stems from heightened trade tensions due to new tariffs imposed by Donald Trump, prompting investors to liquidate high-risk assets. Altcoins like XRP and Dogecoin are also suffering substantial losses. The future of the crypto market hinges on evolving trade dynamics and U.S. monetary policy, as investors seek liquidity amidst rising volatility.
Cryptocurrencies Face a Major Downturn
In recent days, the cryptocurrency market has been hit hard by a significant downturn. On Monday, Bitcoin saw a dramatic drop of nearly 6%, while Ether experienced a staggering plunge of 26%, marking its most substantial decline since 2021. This turmoil is largely attributed to escalating trade tensions initiated by Donald Trump, who has implemented new tariffs on imports from China, Canada, and Mexico. As a result of these economic shifts, investors are moving away from high-risk investments, leading to a wave of sell-offs across the crypto landscape.
A Sharp Decline in the Crypto Market
Bitcoin (BTC), the leading cryptocurrency by market capitalization, dropped to $91,304 during the trading session before making a slight recovery to $93,045, reflecting a decrease of 4.12%. Over the past 24 hours, Bitcoin’s overall decline has reached 6%, with a weekly drop of 7%. Ether (ETH) faced an even steeper decline, plummeting by 20.3% to $2,470, with a record dip of 26.5% at one point.
Other cryptocurrencies, commonly referred to as altcoins, are also feeling the pressure. XRP has lost 22%, Dogecoin has dropped by 24%, and various memecoins, which are based on viral trends, are witnessing significant losses as well.
The crux of this market chaos lies in Trump’s recent protectionist policies. On Saturday, he enacted a decree that includes:
- 25% tariffs on products imported from Mexico and Canada.
- An additional 10% tariff on existing imports from China.
This escalation in trade tensions raises concerns of retaliatory economic measures, which could disrupt international trade and result in heightened inflation. Consequently, the American Federal Reserve is likely to maintain high-interest rates, which negatively impacts financial markets and contributes to increased volatility in the cryptocurrency sector.
As this economic storm brews, investors are prioritizing liquidity and are rapidly liquidating speculative assets such as cryptocurrencies to mitigate losses in other markets.
Is This a Buying Opportunity or a Heightened Risk?
Despite the market’s downturn, some analysts suggest that this may present a buying opportunity. Technically, Bitcoin remains above its critical support level of $90,000 to $92,000, a threshold that has previously halted larger declines since November 2024.
However, a drop below $90,000 could signal a more significant downturn, potentially leading to prices as low as $85,000. On the flip side, if the market manages to recover, the first bullish target could be $100,000.
“Ether is facing more pressure than Bitcoin or Solana, especially with the potential inclusion of Solana in the strategic reserve that Trump is contemplating,” states Jonathan Yark, an analyst at Acheron Trading.
There are discussions that the Trump administration might ease regulations surrounding digital currencies and establish a national Bitcoin reserve, which would encompass government-held crypto assets. Such a move could favor Bitcoin over Ether, widening the volatility gap between these two cryptocurrencies.
Financial Markets on Edge
This turmoil is not confined to the cryptocurrency market. Asian stock markets are experiencing declines due to fears of an impending trade war, while several national currencies are facing substantial devaluations, including:
- Mexican Peso
- Canadian Dollar
- South Korean Won
- Australian Dollar
Even gold, often viewed as a safe haven asset, has dipped by 0.53%, underscoring the heightened anxiety among investors.
The future trajectory of cryptocurrencies will largely hinge on the unfolding trade tensions and the American monetary policy. This is a scenario that requires close monitoring in the days ahead.