Cryptocurrency prices took a hit on Monday, as bitcoin dropped to a three-week low and ether fell to its lowest level since early September. The decline was attributed to concerns over a potential global trade war, which spooked investors and prompted them to move away from risky assets.
On Monday morning in Asia, bitcoin fell to $94,476.18, hitting a low of around $91,441.89. Ether, another popular cryptocurrency, was down by around 24 per cent and fell back to levels last seen in early September, trading at $2,494.33.
The market turmoil was sparked by US President Donald Trump’s decision to impose 25 per cent tariffs on Mexican and most Canadian imports, as well as 10 per cent tariffs on goods from China. This move led to immediate backlash from Canada and Mexico, as well as China, which announced plans to challenge the tariffs at the World Trade Organisation.
Cryptocurrencies, which trade around the clock, have been particularly sensitive to broader market sentiment as of late. Investors fear that tariffs could hamper economic growth, impact company earnings, and drive up inflation.
According to Chris Weston, head of research at Pepperstone, cryptocurrencies have become a popular asset class for expressing risk during weekends and on news of this nature, prompting them to act as a risk proxy for investors.
Additionally, the cryptocurrency market has faced downward pressure following a strong rally after Trump’s election. Some investors have been disappointed by the lack of immediate steps to boost cryptocurrencies or ease regulations since he assumed office.
Bitcoin reached a record high of $107,071.86 on January 20, coinciding with Trump’s inauguration as the 47th US President. The cryptocurrency has since risen by 40 per cent since the election in early November, driven by hopes of crypto-friendly regulations under the Trump administration.
Despite previously labelling crypto as a scam, Trump embraced digital assets during his campaign, pledging to make the US the “crypto capital of the planet.” Last month, he established a cryptocurrency working group to propose new regulations and explore the creation of a national cryptocurrency stockpile.
In conclusion, the cryptocurrency market faced a downturn on Monday amid concerns over a global trade war, with bitcoin and ether experiencing significant losses. The market’s reaction to Trump’s tariffs and the broader economic implications led to a risk-off sentiment, pushing investors towards safer assets.
