Crypto in Crisis! Trump's tariffs spark fears; what's next for investors?

Flagship cryptocurrency, Bitcoin, which scaled a record high on optimism fueled by Donald Trump’s return to the White House as the 47th US President, tumbled sharply on Monday, February 3, 2025, as investors fretted over the economic impact of Trump’s recent tariff announcements. Notably, Trump has signed executive orders imposing new tariffs, including 25 per cent on Canada and Mexico, and 10 per cent on China. 

The trade policies, analysts said, could fuel volatility across risk assets, including cryptocurrencies.

 

"The crypto market had a strong reaction to Trump imposing import tariffs on goods amid rising inflation concerns. After Bitcoin recorded its first monthly close above $100,000 in January 2025, it is now consolidating between $91,200 and $94,800," said Edul Patel, CEO and co-founder of Mudrex, a crypto exchange platform.

 

Bitcoin dropped nearly 7 per cent in the last 24 hours. As of 10:50 AM on Monday, February 3, Bitcoin was trading at around $93,434.78 on Binance.com, down 6.42 per cent from the previous day. Bitcoin's 24-hour trading volume stood at $92.71 billion. The world’s most popular cryptocurrency’s all-time high remains $109,114.88.

 

The impact of the sell-off extended to other cryptocurrencies. Ethereum was down 20 per cent, trading at approximately $24,468. Binance Coin (BNB) slipped 16 per cent to $545, while XRP tumbled 24 per cent to $2.15. Solana also faced selling pressure, declining 8.62 per cent to $190.46. These price movements are based on data from Binance.com.

 

Going ahead, analysts caution that the reactions of other nations, particularly the UK and BRICS countries, will further shape market volatility. Investors, they added, should remain cautious as additional tariffs may drive Bitcoin lower before it resumes its upward momentum.

 

Sumit Gupta, co-founder of CoinDCX, meanwhile, believes such measures can introduce significant volatility in the near-term. However, the broader future of crypto, including Bitcoin, must be considered through a long-term lens, he added.

 

"Geopolitical shifts like the ones unfolding now create an environment where traditional markets may experience heightened instability, driving investors to seek alternative assets," Sumit Gupta of CoinDCX said.

 

This is particularly true as the US dollar strengthens and international trade dynamics shift. While the current tariffs are straining China’s export-driven economy, they may also accelerate global interest in decentralised assets like crypto, which act as a hedge against inflation and market unpredictability, he added.

 

In times of economic uncertainty such as during past US-China trade conflicts, analysts believe digital assets gained traction as a store of value, much like gold did in previous crises. For investors, the key takeaway is that crypto, with its ability to act as a non-correlated asset, may become increasingly attractive as global macroeconomic trends unfold, they said.

 

"However, given the volatility, it is important for investors to be cautious, conduct thorough due diligence, and take a long-term perspective," Gupta said.

 

Going ahead, in the near-term, Edul Patel of Mudrex expects Bitcoin to see a low of $89,000 before resuming its upward momentum.