Trump's tariffs trigger $2B in crypto liquidations
Global markets are on edge after U.S. President Donald Trump’s controversial tariff announcement, leading to a massive wave of crypto liquidations and widespread volatility. Trump’s decision to impose 25% tariffs on goods from Mexico and Canada, as well as 10% on imports from China, has sent shockwaves through financial markets, affecting everything from traditional stocks to the digital asset space. As markets brace for the tariffs to take effect, the crypto world is facing a particularly volatile time.
In the wake of this announcement, U.S. stock futures dropped significantly, signaling the growing uncertainty. Dow futures fell 1.2%, while the S&P 500 and Nasdaq futures tumbled 1.9% and 2.7%, respectively. This sharp decline also mirrored crypto markets, where Bitcoin saw a 5% drop and Ethereum plummeted 10%. Altcoins, including Dogecoin and XRP, also suffered, with losses as steep as 19%.
The impact of these tariffs on crypto assets has been profound, with over $2.1 billion in crypto liquidations recorded within 24 hours, according to CoinGlass data. Bitcoin, which had been showing positive momentum, fell to $96,300, its lowest level in three weeks. Ethereum mirrored this downtrend, dropping to around $2,800. This market contraction has erased the gains crypto had made since early November. The economic fallout from the tariffs has ignited concerns that inflation could rise, dampening investor sentiment and leading to even greater volatility in the digital asset market.
“While the reaction in the market seems exaggerated, these tariffs are expected to push inflation higher, causing a prolonged period of uncertainty in both traditional and crypto markets,” explained Nick Forster, founder of DeFi derivatives protocol, Derive.
Moreover, the possibility of sustained higher interest rates adds another layer of pressure to the market. As inflation continues to rise due to increased import costs, the Federal Reserve may keep rates elevated throughout 2025, which could harm the appetite for riskier assets like cryptocurrencies. This expectation has investors bracing for further downturns, particularly in the coming months.
Some market experts, however, believe the initial reaction to the tariffs may be overstated. “If the countries involved strengthen their control on fentanyl production, we could see a reduction in tariffs, and the market will likely stabilize,” suggested Peter Chung, head of research at Presto, a Singapore-based algorithmic crypto trading firm.
While caution is certainly warranted, the crypto sector, like traditional markets, remains highly sensitive to geopolitical tensions. As the effects of the tariffs unfold, investors will need to carefully navigate the uncertainty. For now, it seems that the market’s reaction is just beginning, and it will take time to determine whether this pain is short-lived or part of a longer-lasting trend. With over $700 million in liquidations already recorded, it’s clear that Trump’s tariff decision has shaken the foundation of the crypto world, and we may not have seen the full extent of the fallout yet.
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