Major digital assets experienced a significant downturn as the Asian trading week commenced, triggered by a renewed trade war initiated by former U.S. President Donald Trump. Bitcoin (BTC), Ether (ETH), Solana’s SOL, and XRP all suffered substantial losses.
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Bitcoin’s price plummeted by 8%, briefly dipping below $93,200 before stabilizing around $93,900 in the afternoon, according to CoinDesk Indices data. Ether (ETH) faced a steeper decline, plunging nearly 20% to trade below $2,500. Solana’s SOL dropped 7% to $193, while XRP suffered a 23% loss, trading at $2. The CoinDesk 20 (CD20), a benchmark index tracking the largest digital assets, mirrored the market’s overall negative sentiment with a nearly 17% decrease. Even Trump’s memecoin (TRUMP) wasn’t immune to the widespread sell-off, experiencing a 12% decline.
Trade War Triggers Market Volatility
The catalyst for this market correction appears to be the re-escalation of trade tensions stemming from the imposition of 25% tariffs on Canada and Mexico by former President Trump. This move sparked widespread concern and uncertainty across global markets, impacting investor confidence in risk assets like cryptocurrencies.
Adding to the market’s woes, World Liberty Financial (WLFI), a crypto project associated with the Trump family, reported a 20% loss on its January crypto investments due to the heightened volatility, as per data compiled by SpotOnChain. This underscored the broad impact of the trade war on the cryptocurrency landscape.
Liquidations and Global Response
The market turmoil led to a significant wave of liquidations. Data from CoinGlass revealed that nearly $1.3 billion in long positions were liquidated within a 12-hour period, with approximately $400 million stemming from Ether positions and $300 million from Bitcoin positions.
The international response to the reimposed tariffs was swift and critical. The European Union vowed a firm response to any tariffs targeting its member states, emphasizing the disruptive and inflationary effects of such measures. A spokesperson, quoted by Politico, stressed that tariffs harm all parties involved. Similar sentiments were echoed in a Wall Street Journal editorial, labeling the situation the “Dumbest Trade War in History.” The United Kingdom appeared to be the sole exception, with Trump hinting at the possibility of a negotiated agreement, according to the BBC.
Trump Defends Tariffs Amidst Criticism
Despite the widespread condemnation, former President Trump defended his actions on Truth Social, dismissing critics and suggesting they were influenced by China. This defense did little to calm market anxieties.
Conclusion: Uncertainty Looms Over Crypto Market
The sudden resurgence of trade tensions under former President Trump has injected significant volatility into the cryptocurrency market. The resulting sell-off highlights the interconnectedness of global markets and the susceptibility of digital assets to geopolitical events. While Bitcoin managed to find some stability after the initial plunge, the overall market sentiment remains cautious. The long-term impact of these renewed trade disputes on the cryptocurrency market remains uncertain, and investors are closely monitoring developments for further signals.
