Cryptocurrency Market Experiences a Sharp Decline as Trade War between Countries Worsens Investor Sentiment

As of 7:10 AM on the 3rd, according to CoinMarketCap, the leading cryptocurrency Bitcoin (BTC) is trading at $97,451, down 3.83% from the previous day.

The cryptocurrency market is experiencing a sharp decline, which is being attributed to the trade war between countries that was anticipated with the inauguration of President Donald Trump.

As of 7:10 AM on the 3rd, according to CoinMarketCap, the leading cryptocurrency Bitcoin (BTC) is trading at $97,451, down 3.83% from the previous day. Altcoins have fallen even more, with Ethereum (ETH) and Ripple dropping by 7.27% and 9.71%, respectively. Other altcoins such as Solana (-5.50%), Binance Coin (-5.63%), Dogecoin (-13.18%), Cardano (-11.64%), and TRON (-7.80%) are also showing significant losses.

The decline in the cryptocurrency market appears to be a response to the announcement by U.S. President Donald Trump on the 31st of last month that tariffs on Canada, Mexico, and China would be implemented starting February 1st.

On the 31st, President Trump officially signed an executive order to impose tariffs on Canada, Mexico, and China under the International Emergency Economic Powers Act (IEEPA). The tariffs are expected to be imposed starting the 4th.

Canada has also retaliated by announcing a 25% tariff on $155 billion worth of U.S. products, while Mexico has taken steps to impose retaliatory tariffs on U.S. products.

These trade disputes between countries are being assessed as having the potential to aggravate inflation concerns, which could dim the outlook for interest rate cuts. CoinDesk analyzes that "the renewed trade war, along with policies to deport large numbers of illegal immigrants from the U.S., could exacerbate inflation and make it difficult for the Federal Reserve (Fed) to cut interest rates." It also explains that "the weakness in Bitcoin prices reflects these concerns and signals a risk-averse sentiment in the market."