Cryptocurrency Market Reels from Worst Day in Over a Year as Tariffs Stoke Fears of Global Trade War

The cryptocurrency market is reeling from its worst day in over a year, shedding nearly half a trillion dollars within 24 hours

The cryptocurrency market experienced its worst day in over a year on Friday, losing nearly half a trillion dollars in value after President Donald Trump announced new tariffs on Canada, Mexico, and China.

The tariffs, which will take effect on February 1, will see the U.S. impose a 25% tariff on imports from Canada and Mexico and a 10% tariff on Chinese goods. The move has sparked fears of a looming global trade war, leading to panic among traders and a sell-off of riskier digital assets.

The price of Bitcoin (BTC) — often seen as a barometer of the crypto market — dropped below $100,000 before recovering slightly. The drop was mirrored across the board, with altcoins such as Ethereum (ETH) and Ripple (XRP) losing around one-third of their value. Solana (SOL) also took a hit, dropping approximately 25% over the same timeframe.

Total liquidations also surpassed $2 billion for the first time this year, reflecting the turmoil in the market. CoinMarketCap’s Crypto Fear and Greed Index plunged, indicating deep-seated fears among market participants for the first time since the data was recorded in October 2024.

"A tidal wave of fear, uncertainty, and doubt has been unleashed across the cryptocurrency market after Trump’s Friday tariff announcement," said Petr Kozyakov, co-founder and CEO of the crypto platform Mercuryo.

"The sell-off pressure is particularly strong for meme tokens, with the recently launched $TRUMP coin dropping 70% from its peak."

While Bitcoin showed some resilience, rebounding to around $94,000, market analysts are keeping a close eye on key support levels. If Bitcoin breaches the $92,000 mark, analysts are warning of increased sell-offs.

The tariffs come with significant financial stakes. The tariffs will see the U.S. impose a 25% tariff on imports from Canada and Mexico and a 10% tariff on Chinese goods, effective February 1. The policy shift has brought increased scrutiny and discussion on how such decisions ripple through global markets, affecting investor confidence.

"Understanding our little crypto market is now very directly linked to the real world outside... is pretty helpful to be (more) successful as trader,” said Evgeny Gaevoy, CEO of Wintermute, in a post on social media, as the broader recognition of macroeconomic factors weighing in on crypto valuations is being noticed.

"This significant downturn in the crypto market is largely driven by concerns over a potential global trade war following President Donald Trump’s announcement,” said Ryan Lee, chief analyst at Bitget Research, reflecting on how the crypto sphere, once perceived as isolated, is increasingly visible and vulnerable to shifts in traditional finance.

The market reacted dynamically as it absorbed these new tariffs, contributing to unique selling patterns, including a dramatic increase in trading volume. Some traders began to level allegations of market manipulation, suggesting that large firms were crashing prices to buy up assets at a discount. Gaevoy responded to these allegations, denying any manipulation, emphasizing their focus on legitimate trading activities.

Further compounding the bearish sentiment, the general public's conversations echoed concerns voiced by financial figures like Robert Kiyosaki, the author of Rich Dad Poor Dad, who commented via the X platform: "Gold, silver, bitcoin may crash... the real problem is debt, which will only get worse. Crashes mean assets are on sale. Time to get richer."

This statement encapsulates the sentiment of opportunistic buying during downturns, though the immediate fallout has left many with heavy losses.

Even beyond cryptocurrency, stock markets across Europe, Asia, and the U.S. faced turmoil on Friday. Investors feared tighter trading conditions, raising stakes across assets during this precarious time. The broader implication of Trump's tariff announcement perhaps hints at increasing tensions within global trade frameworks.

Despite the turmoil, historical patterns suggest cryptocurrencies could rebound — as seen after previous downturns following Trump's earlier policies. His pledge to be the first “crypto president” and the expectations of favorable policies for the industry, such as creating a U.S. bitcoin reserve, remain fresh on investors' minds.

While evidence suggests the tariffs have initiated considerable strains for the crypto market today, the long-term effects on institutional adoption of cryptocurrencies may still be beneficial, as supporters argue Bitcoin could navigate through volatile waters. Investors remain vigilant for shifts to determine if riskier assets can regain momentum.

With the crypto ecosystem constantly changing, participants are reminded of the inherent risks and rapid fluctuations dictated by external policies — a reminder of how deeply interconnected this young market is with global economic conditions. The upcoming days will be telling as traders on both sides of cryptocurrency exploration navigate this uncertain terrain.