The cryptocurrency market experienced a significant downturn on February 3, 2025, following the announcement of new tariffs by U.S. President Donald Trump. The administration imposed a 25% tariff on imports from Canada and Mexico, and a 10% levy on Chinese goods, effective immediately. These measures have heightened fears of a global trade war, leading to a broad sell-off across financial markets, including cryptocurrencies.
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Impact on Major Cryptocurrencies
Bitcoin, the leading cryptocurrency by market capitalization, fell by approximately 2.5%, trading at $95,344, down from over $105,000 the previous Friday. This decline marks a three-week low for Bitcoin. Other major cryptocurrencies faced even steeper declines:
- Ethereum (ETH): Dropped 12%, trading at $2,500.
- XRP: Plummeted 9.7% to $2.35.
- Solana (SOL): Decreased by 3.7%.
- Dogecoin (DOGE): Fell 7.9% to below $0.25.
In total, over $2 billion was wiped from the crypto market within 24 hours, reflecting the severity of the sell-off.
Market Reactions and Analysis
The cryptocurrency market reacted strongly to the tariff announcement, with more than $2 billion in leveraged liquidations recorded within 24 hours. Bitcoin dropped below $100,000 before sliding further to $92,000, marking one of its steepest declines since early January. Ethereum and other digital assets, including XRP and Dogecoin, saw losses of more than 30%.
Economic analysts warn that higher tariffs exacerbate inflation, as businesses are to pass additional costs onto consumers. Some fear the tariffs lead to job losses and supply chain disruptions, making the economic outlook more uncertain.
Broader Market Reactions
The imposition of tariffs has not only affected the crypto markets but has also led to declines in traditional financial markets. Global stock indices have reported losses, and commodities have experienced increased volatility. Investors are expressing concerns that escalating trade conflicts may weaken economic growth, impact corporate earnings and contribute to inflation.