Similar to the stock market, the cryptocurrency market had its ups and downs this week when responding to a new President Trump policy stamped with tariffs. The vague relief coupled with apprehension comes before all of the facts are known, which is always the case with new policies. Then, after considering the details, Bitcoin and other crypto coins suffered a severe crash. In the end, the crypto market advocates believe that the long-term impact may not be entirely as harsh or devastating as it appears to be in the short term.
Trump’s “Reciprocal” Tariffs: A Global Jolt
The reciprocal tariffs proposal by President Trump to rectify unapologetic trade imbalances has already, within a day of its public announcement, rattled the global economy. As the name suggests, reciprocal tariffs are meant to be: The US will impose tariffs on imports of goods from other countries at the same level as the tariffs those countries impose on American exports. Trump said the United States was not trying to do “anything dramatic” but rather was charging other countries “half of what they charge us.”
Initial Optimism, Rapid Reversal: A Market Whiplash
The initial response of crypto markets to the news of the tariffs was somewhat optimistic, as some traders saw it as an easing of uncertainty. But right before the start of the baseline tariffs, or ‘level 0’ tariffs, which will start on the 5th of April 2018, this sentiment shifted for the worse. The announcement made clear that per-country-specific tariffs would be enforced, meaning China would pay a 34% tariff, the EU 20%, and Japan 24%.
The Impact of Tariff Influences on Bitcoin and Ethereum’s Price Drops
A change in the perception of the tariff impact resulted in a notable decline in cryptocurrency prices. Bitcoin (BTC), which was on a bullish run and nearly touched the strong resistance level of $88,500, retraced by 2.6% to hit $82,876. Ethereum (ETH) suffered an even worse fate, crashing by over 6% from $1,934 to $1,797 according to data by CoinGecko. This sell-off sentiment was widespread across the crypto space as the total market cap shed 5.3% and slipped to $2.7 trillion.
Investor Apprehension: The Crypto Fear and Greed Index
The crypto volatility coupled with the chance of a longstanding trade tussle rattled investors, pushing the Crypto Fear & Greed Index into the fear zone. The index dropped to 25 as a result, indicating an increase in anxiety within the markets and a deviation from risk appetite.
A Recovery: Resilience of the Market
The unprecedented increase in price volatility was met with equally swift resistance as the market stiffened and the prices partially recovered following the initial carve. Bitcoin advanced 0.8% to $83,205 and Ether climbed 1.2% to $1,810. While markets overall are volatile due to tariffs, this shows the market is not completely bearish.
Stock Market Chaos: Effects on the Economy as a Whole
The consequences of Trump’s tariffs were not limited to the crypto market. As cited in The Kobeissi Letter, the S&P 500, which measures the value of companies within the U.S. stock market, experienced a historic loss of $2 trillion in market capitalization. This can be considered a loss of 125 billion dollars every minute and indicates the amount of destruction trade wars economically bring.
Potential Opportunities: Expert Perspective
Some experts provide a more measured explanation. For example, crypto investor David Hernandez of 21Shares noted that “Markets thrive on certainty… institutional investors may step in to take advantage of lower prices.” Hernandez elaborates that the speculation phase caused by the tariff announcement period may prove to be useful. In this case even negative speculation does have a form of value ironically.
The Road Ahead: Ambiguity and Retaliation
The response from other nations regarding Trump’s tariffs set forth a very large fork in the road for the market. These issues especially stem from China and the EU; in the case of them issuing their own tariffs, it may lead to a spiraling cycle of trade war settings. Market turbulence would undoubtedly rise. US Treasury Secretary Scott Bessent actively shuts this idea down, claiming the escalatory risk is not that high, stating, “The current tariffs are at the ‘high end’ of the scale”… t that idea of getting hit with retaliatory measures is still in question.
Final Remarks: An Erratic Road Ahead
The new tariffs imposed by President Trump have created a pronounced level of discord in the global economy and the cryptocurrency market. Although the initial response was a steep sell-off, some analysts speculate that the market’s long-term trajectory will hinge on other countries’ reactions and how trade relations will be managed post-tariff. It is evident that both investors and traders need to be on alert since the situation can change rapidly.
