The post Crypto Market Sell Off: How Trump’s Tariffs are Driving a Crypto Liquidation appeared first on Coinpedia Fintech News
Donald Trump’s new tariffs have sent shockwaves through global markets, triggering a sell-off in both stocks and crypto. The U.S. president announced hefty tariffs—25% on Mexican and Canadian imports and 10% on Chinese goods—which will take effect on Monday. Investors fear these tariffs will push inflation higher, forcing the Federal Reserve to keep interest rates elevated for longer, leading to a risk-off sentiment across financial markets.
Traders, investors, and industry experts were split over Trump’s tariff mess before implementing the crypto regulations which crashed the entire crypto including the stocks market. However, this move is also seen as positive for Bitcoin in the long run as this will weaken the U.S. dollar and U.S. rates.
Let’s dive into the current market scenario in detail.
Market Brace for Impact
Dow futures plunged 1.2% late Sunday, while S&P 500 and Nasdaq futures fell nearly 2% and 3%, respectively. Crypto markets, which trade around the clock, reacted even faster. Bitcoin dropped 5%, Ethereum slumped 10%, and Dogecoin and XRP both saw steep 19% declines. In just 24 hours, over $2.1 billion worth of crypto positions were liquidated, with Bitcoin falling to $96,300 and Ethereum crashing to $2,800.
Traders Weigh the Impact
Some analysts believe the panic is temporary and that markets have already priced in the worst. Ryan McMillin of Merkle Tree Capital suggested that market makers took advantage of the fear to liquidate leveraged long positions, potentially creating a price floor for crypto. However, Nick Forster of Derive warned that volatility is likely to persist, as inflationary concerns could limit any near-term recovery.
Chris Weston from Pepperstone said to CNBC News, that traders look at crypto to see how markets might react. Investors are worried that trade fights between countries could slow down the economy, hurt businesses, and make prices go up, which adds more uncertainty to the market.
Adding to the uncertainty, Canada, Mexico, and China have promised swift retaliation. Canada slapped 25% tariffs on $155 billion worth of U.S. goods, while China is preparing a World Trade Organization lawsuit. This trade war escalation has also pushed the U.S. dollar higher, weakening other major currencies.
What’s Next?
Investors are now closely watching key U.S. economic data releases this week, including non-farm payrolls and unemployment figures. If the data suggests a strong economy, the Federal Reserve may be even less inclined to cut interest rates, which could further weigh on crypto and equities.
Despite the turmoil, some experts argue that the market reaction might be exaggerated. Peter Chung of Presto noted that Trump linked the tariffs to the fentanyl trade, implying that they could be lifted if Mexico, Canada, and China enforce stricter drug control policies. If trade tensions ease sooner than expected, markets may stabilize.
For now, uncertainty rules. With inflation concerns rising and the Federal Reserve likely to hold rates higher for longer, risk assets—including crypto—could remain under pressure in the coming weeks.
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