It’s been another gruesome day for the crypto market — and although it’s sometimes difficult to pinpoint what’s causing sell-offs, the current turmoil has an obvious explanation.
Donald Trump’s newly unveiled tariffs are far worse than what analysts had expected. A flat 10% tax will apply to all countries that export goods to the U.S. — with some economies facing substantially higher levies.
The president’s controversial new policies mean that the total tariffs against Chinese products will now exceed 50% — dramatically hiking prices for American consumers, and fueling fears of rising inflation and a potential recession.
Asian markets fell sharply in the early hours of Thursday morning as traders digested the news. Japan’s Nikkei 225 had plunged by 4% at one point, and ended the trading session down 2.77%.
Misery then spread to Europe. London’s FTSE 100 was down 1.5% intraday — faring slightly better than other indices because it’s been spared the worst of the tariffs. Markets in Paris, Frankfurt and Milan all fell 2%.
Wall Street has only been able to react now because Trump’s announcement was made after the closing bell on Wednesday. The S&P 500 opened 3.4% lower, while the tech-heavy Nasdaq 100 fell 4.1%.
Bitcoin’s 24/7 nature meant we were able to get some instant reaction. The world’s biggest cryptocurrency slid from $88,466.96 to $82,182.32 — a peak-to-trough drop of about 7%.
But BTC has gotten off fairly lightly compared with smaller cryptocurrencies. While it’s declined by 5% over the past seven days, Ether is down 11%, XRP by 13%, and Solana by 17.5%.
What Will the US Tariffs Do to Crypto?
Zooming out, it’s worth looking at how Trump’s radical policies could affect the crypto markets more widely in the weeks and months to come — as major economies either try to negotiate trade deals with Washington, or implement tit-for-tat tariffs of their own.
One notable consequence of these trade restrictions lies in how the greenback has weakened substantially in the wake of “Liberation Day” — taking the U.S. dollar index to levels not seen since October of last year. USD has also fallen to its weakest point against the British pound in six months.
In a recent report, CoinGecko argued that these fluctuations could prove advantageous to BTC, and explained:
“When the dollar weakens, Bitcoin often strengthens, making it an attractive alternative. This inverse relationship, much like that between gold and the dollar, suggests that Bitcoin may continue to serve as a hedge against fiat currency fluctuations.”
But it might be a little premature to roll out the bullish predictions just yet. The ongoing uncertainty posed by these tariffs — which has only been exacerbated by the details of Trump’s plans yesterday — has put the S&P 500 on course for its biggest one-day loss in three years. This is far more likely to have an impact on Bitcoin’s performance in the short term.
Tech stocks were also nursing big losses in pre-market trading. Apple was off by 7.7%, Amazon by 6.6%, and Tesla by 6%.
At one point on Thursday, Polymarket suggested that the odds of the U.S. entering recession in 2025 stood at 53% — powerfully illustrating the nervousness of how these tariffs will impact America’s GDP.
It’s also fascinating to look at the CME FedWatch tool, which monitors predictions among interest rate traders.
Image: CME FedWatchBefore Trump’s “Liberation Day” announcement, just 10.6% believed that the Fed will cut interest rates by 25 basis points at its next meeting in May. But fast forward to now, and that figure has surged to 27.3%.
Lower interest rates have the potential to make Bitcoin more attractive for investors — all while increasing liquidity in the crypto markets.
In the short term, the big question is whether BTC will be able to stay above the psychologically significant threshold of $80,000 — or whether the worst is yet to come.
As you might expect, the likes of Samson Mow and Michael Saylor are continuing to put a brave face on Bitcoin’s future potential — despite crypto investors being gripped by Extreme Fear.
But with a lack of positive catalysts on the horizon, it could end up being a very bumpy second quarter.
The post Why is Crypto Crashing? There’s Just One Reason appeared first on Cryptonews.
