The crypto market saw a sharp surge followed by a quick dip as macroeconomic tensions weighed on investor sentiment. XRP, Dogecoin (DOGE), Solana (SOL), and Cardano (ADA) recorded gains of nearly 20% before retracing, while Bitcoin (BTC) and Ethereum (ETH) remain up by around 4%. The market initially benefited from a “buy-the-dip” strategy following Monday’s $2.2 billion liquidation, but enthusiasm was short-lived as China announced retaliatory tariffs against the U.S.
Tariffs Shake Markets, Crypto Caught in the Crossfire
Former U.S. President Donald Trump‘s decision to impose tariffs on imports from Canada, Mexico, and China rattled financial markets, triggering a steep drop in risk assets, including Bitcoin. The crypto industry had been riding a bullish wave in recent months, but escalating trade tensions now pose a fresh challenge.
Ben El-Baz, Managing Director at HashKey Global, noted that while crypto has enjoyed strong momentum, ongoing trade disputes could dent market sentiment. “The damage from the tariffs could still be temporary if more crypto-friendly policies in the U.S. come into play,” El-Baz told CoinDesk.
Bitcoin Still Trades Like a Risk Asset
Despite narratives portraying Bitcoin as “digital gold,” its price action suggests it continues to behave like a risk asset. Min Jung, a research analyst at Prestro Research, pointed out that China’s retaliatory 10% tariff on the U.S. has exerted downward pressure on crypto, mirroring global equity markets.
“While today’s initial reaction may have been an overreaction, heightened volatility is likely to persist,” Jung said. “The key question is whether this move is a negotiation tactic or the beginning of a prolonged trade conflict, given Trump’s strong stance on China.”
Stablecoins Gain Popularity Amid Market Uncertainty
As volatility grips the crypto market, stablecoins are seeing increased demand. Investors are using dollar-backed digital assets as a hedge against currency fluctuations and economic uncertainty. While Bitcoin’s long-term fundamentals remain intact, near-term price movements will likely be dictated by further developments in the U.S.-China trade war.
For now, traders remain divided on the long-term implications of the tariffs, with markets awaiting further clarity on whether tensions will escalate or ease in the coming weeks.
