On Sunday, cryptocurrencies experienced a sharp decline as President Donald Trump announced the imposition of import tariffs on Canada, Mexico, and China. This decision comes as part of long-promised trade measures, set to take effect on Tuesday. As a result, Bitcoin and Ether suffered significant losses, with Bitcoin falling as low as $96,202.42 and Ether plunging to its lowest level since November.
The U.S. conducts approximately $1.6 trillion in business with the three countries affected by the tariffs. The announcement has led to a surge in the U.S. dollar index, which rose nearly 1%, further impacting the cryptocurrency market. The CoinDesk 20 index, which tracks the performance of the largest 20 digital assets by market capitalization, dropped by 9% in response to the heightened economic uncertainty.
Bitcoin, often regarded as a hedge against inflation and long-term uncertainty, is currently about 11% off its record high of $109,350.72 achieved on January 20. Despite its long-term potential, Bitcoin is trading as a risk asset in the short term, evidenced by its recent volatility. Investors are closely monitoring the $90,000 mark as a critical support level for Bitcoin. Should it fall below this threshold, some investors warn of a possible further decline toward $80,000.
Ether's decline adds to the overall bearish sentiment in the cryptocurrency market. The digital currency has struggled to maintain its value amid growing concerns over global trade tensions and their potential impact on the broader financial landscape.
In the long run, a sustained tariff war could weaken both the dollar and U.S. interest rates, a scenario that some analysts believe could be "amazing" for Bitcoin's future prospects. However, in the immediate aftermath of the tariff announcement, cryptocurrencies saw a risk-off move as investors reevaluated their positions.