Major cryptocurrencies like Bitcoin and ether witnessed steep declines on Monday as rising tariff war tensions weakened investor sentiments. During early trade in Asia, Bitcoin fell to $94,476.18, briefly hitting a three-week low of $91,441.89.
Ether saw an even steeper drop of 24 per cent, hitting its lowest level since September, to $2,494.33.
The downturn extended into Sunday, with bitcoin slipping 7 per cent to $93,768.66, according to Coin Metrics. The CoinDesk 20 index, which tracks the top 20 cryptocurrencies by market capitalisation, dropped 19 per cent.
Trump’s Tariffs sets off market jittersThe selloff follows US President Donald Trump’s announcements of a a 25 per cent levy on imports from Canada and Mexico and a 10 per cent tariff on Chinese goods, set to take effect on Tuesday. Given that the US conducts around $1.6 trillion in annual trade with these three nations, the move has heightened fears of an economic slowdown.
In retaliation to the levies, Canada and Mexico vowed to impose countermeasures, while China signalled plans to challenge the tariffs at the World Trade Organisation.
"Crypto is really the only way to express risk over the weekend, and on news like this, crypto resorts to a risk proxy," Chris Weston, head of research at Pepperstone, told CNBC. The market volatility is expected to weaken economic growth, affect corporate earnings and drive inflation higher.
Following Trump's victory in elections, Bitcoin had surged 40 per cent, reaching an all-time high of $107,071.86 on January 20, the day of his inauguration as the 47th US President. Much of this rally was driven by expectations that his administration would introduce crypto-friendly policies, with Trump himself vowing to make the US the "crypto capital of the planet."
However, despite early optimism, some investors have grown impatient over the lack of concrete regulatory reforms. Last month, Trump ordered the formation of a cryptocurrency working group to explore potential regulations and even consider a national crypto reserve, but rigid policy changes remain absent.
Jeff Park, head of alpha strategies at Bitwise Asset Management, believes the ongoing tariff war could ultimately benefit bitcoin in the long run. "
“A sustained tariff war will be amazing for bitcoin in the long run due to an eventual weakening of the dollar and US rates." he told ET.
Analysts are keeping a close eye on the $90,000 support level for bitcoin, warning that a drop below this threshold could trigger a slide towards $80,000. Historically, crypto markets have endured corrections of around 30 per cent during bull runs.
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