Bitcoin’s Price Surge and Subsequent Decline
Over the weekend, Bitcoin reached a peak of nearly $95,000 after President Donald Trump announced the creation of a crypto strategic reserve. However, these gains were short-lived as trade tensions between the US and key trading partners, such as China, Canada, and Mexico, led to a significant market downturn.
Losses in the Crypto Market
Traders speculating on the crypto market experienced losses totaling $975.65 million in just one day, according to data from Coinglass.
Impact of US Trade War on the Market
On March 3, President Trump escalated trade tensions by increasing tariffs on Chinese imports from 10% to 20% and imposing a 25% duty on goods from Mexico and Canada. This decision caused a sell-off in both stocks and cryptocurrencies.
China responded by raising tariffs on US agricultural goods by 10% to 15% and limiting investments from 25 American firms. Canada also imposed immediate tariffs on $30 billion worth of US products, with plans to expand tariffs by an additional $125 billion by March 25.
Crypto Market Reaction
Following these trade war developments, the crypto market reacted swiftly. Bitcoin’s price plunged by 10% to $83,577, according to CryptoSlate data. Altcoins associated with Trump’s crypto reserve initiative, including Ethereum, Cardano’s ADA, XRP, and Solana’s SOL, saw double-digit losses, with some dropping as much as 17%.
Vincent Liu, the CIO of crypto investment firm Kronos Research, stated that investor confidence was shaken by the tariff escalations, leading to a sharp sell-off in the crypto market. This highlighted the market’s increasing sensitivity to macroeconomic shifts.
Analysts at The Kobeissi Letter noted that the market lost $500 billion in value within 24 hours, resulting in the total crypto market cap being $100 billion lower than before the crypto reserve announcement on March 2. The decline was attributed to a global shift towards risk-off assets as trade war concerns heightened economic uncertainty.
“The reality is that crypto is now viewed as a risky asset. Take a look at the sharp divergence between Gold and Bitcoin in their YTD performance. While gold prices are up +10%, Bitcoin is down -10% since January 1st. Crypto is no longer viewed as a safe haven play.”
