U.S. President-elect Donald Trump has significantly influenced market sentiments, particularly in the realm of cryptocurrencies. Following the announcement of long-anticipated import tariffs on Canada, Mexico, and China, cryptocurrencies experienced a sharp decline. Reports indicate that Bitcoin’s price fell by 7% to $93,768.66, as highlighted by Coin Metrics. The broader cryptocurrency market also suffered, with the CoinDesk 20 index, which tracks the largest 20 digital assets by market capitalization, experiencing a 19% drop. Ether, in particular, saw a steep 20% decline, reaching its lowest point since November.
The downward trend began after Trump signed an executive order imposing a 25% tariff on imports from Mexico and Canada, along with a 10% tariff on China, scheduled to take effect shortly. This move impacts approximately $1.6 trillion in trade between the U.S. and these nations.
Despite the immediate negative impact on Bitcoin’s price, some analysts, like Jeff Park from Bitwise Asset Management, suggest that a prolonged tariff conflict could ultimately benefit Bitcoin in the long run. They believe that such economic strain could lead to a weakening of the dollar and an increase in U.S. interest rates, which may drive investors towards Bitcoin as a hedge against inflation and economic uncertainty.
However, in the short term, Bitcoin has demonstrated its correlation with risk assets, reacting negatively to uncertainty surrounding the trade war initiated by Trump’s tariffs. Investors are closely monitoring the $90,000 mark as a critical support level for Bitcoin, with some cautioning that a significant drop below this level could lead to further declines towards $80,000. As it stands, Bitcoin is approximately 16% below its all-time high of $109,350.72 recorded on January 20. Crypto traders are familiar with the volatility of the market, often weathering corrections of around 30% even during bullish phases.
