The re-emergence of trade war tensions, fueled by proposed tariffs by former U.S. President Donald Trump, is causing concern among market analysts. These experts suggest that Ethereum’s native token, Ether (ETH), could be particularly vulnerable in the current climate.
Trump’s announcement of a 25% tariff on all steel and aluminum imports, in addition to existing duties, and the threat of reciprocal tariffs on all countries, has injected uncertainty into the global economic outlook. This rhetoric, coupled with a potential spike in inflation, could trigger downside volatility in various markets. A key indicator that previously signaled Bitcoin’s rise above $100,000 when it traded below $70,000, recently turned bearish, further amplifying concerns.
While major cryptocurrencies remained relatively stable in European trading hours following the announcement, with U.S. futures showing slight gains, the underlying tension persists. Bitcoin, Ether, XRP, Solana’s SOL, and Dogecoin (DOGE) experienced minor gains in the 24 hours following the announcement, while BNB Chain’s BNB saw a more significant decline.
Historically, trade wars and the resulting economic uncertainty tend to drive investors away from risk assets like cryptocurrencies towards safer havens. This potential shift in investment behavior could exacerbate existing downward pressure on Ether.
Some analysts believe Ether’s vulnerability stems from a confluence of factors, including waning overall sentiment towards cryptocurrencies and the asset’s already turbulent performance this year. A notable decline in the Bitcoin-Ether ratio, a key market metric, further underscores the potential for ETH to underperform compared to BTC.
This potential downturn in ETH could negatively impact related assets, including memecoins like Dogecoin (DOGE) and Ethereum-based DeFi tokens, which often mirror Ether’s price movements. The lack of significant catalysts and narrative leadership within the Ethereum ecosystem may further contribute to its underperformance.
Experts highlight the unwinding of gains from late 2024 and the shift in investor expectations regarding Federal Reserve interest rate cuts as contributing factors to the current market outlook. With expectations of fewer rate cuts, the appeal of risk assets, including cryptocurrencies, diminishes.
Market participants anticipate continued volatility in the crypto market as the trade war narrative unfolds. The potential for a feedback loop between market reactions and policy decisions could further amplify uncertainty. The current market sentiment suggests a lack of upside catalysts for Bitcoin, with options traders favoring put options, reflecting a bearish outlook. This sentiment could extend to Ether and the broader altcoin market.
In conclusion, the resurgence of trade war concerns introduces a significant element of uncertainty into the cryptocurrency market. Ethereum, already facing headwinds, appears particularly susceptible to further downside pressure in this environment. The interplay between geopolitical developments, investor sentiment, and macroeconomic factors will likely continue to shape the trajectory of Ether and the broader crypto market in the coming weeks.
