Bitcoin and altcoins crash following Trump’s tariff announcements, which spooked investors

The cryptocurrency market has taken a sharp downturn following former President Donald Trump’s announcement of new tariffs on imports from China, Mexico, and Canada, which has spooked investors and led to a broader sell-off. As of February 1, the U.S. imposed a 25% tariff on imports from Canada and Mexico and a 10% tariff on Chinese goods. This move added yet another layer of complexity to the ongoing trade tensions and has contributed to market uncertainty.

In the wake of Trump’s tariff announcement, Bitcoin (BTC) experienced a significant price drop, falling by 5% in a matter of hours. The cryptocurrency reached a low of approximately $91,200 before slightly rebounding to around $94,000. Despite the recovery, Bitcoin remains roughly 13% below its all-time high of $109,000, signaling continued downward pressure.

Additionally, Bitcoin’s trading volume surged by more than 200%, a clear indication of rising market panic and increased selling activity. Such a sharp price decline, combined with the dramatic spike in volume, typically signals fear and uncertainty in the market, as traders and long-term holders begin to offload their assets.

The decline in Bitcoin’s price triggered a cascade effect, affecting altcoins across the board. Over the past 24 hours, Ethereum (ETH) plummeted by nearly 20%, Ripple (XRP) by 22%, Solana (SOL) by 8%, and Binance Coin (BNB) by over 15%. This widespread sell-off indicates that investor sentiment across the crypto market has been severely impacted by the combination of global trade tensions and uncertainty surrounding Bitcoin’s price movements.

The global cryptocurrency market capitalization has dropped by almost 12% during the same period, now settling at around $3.15 trillion. This sharp decline is a reflection of the growing sense of risk-off sentiment among investors, who are pulling back from riskier assets in favor of safer investments.

Rising trading volume amid price dips is often a signal of market panic. The sharp increase in selling pressure suggests that a considerable number of traders and investors are opting to exit their positions—either at a loss or at lower-than-expected profits. The Bitcoin Long-Term Holder SOPR chart supports this theory, showing that long-term holders are increasingly selling at a loss or lower profits than their initial purchase prices.

This type of behavior is often associated with capitulation, a phenomenon where long-term investors are forced to sell their holdings due to market fear and uncertainty, marking the final stages of a bearish market trend. Experts, including BitMEX CEO Arthur Hayes, have even raised concerns that the market could be heading toward a financial crisis due to the prolonged downturn in the cryptocurrency market.

While Bitcoin and other cryptocurrencies have experienced significant price corrections, there is still uncertainty in the market about the next move. Analysts are closely monitoring the situation, particularly the ongoing impact of Trump’s tariffs and the broader global economic conditions.

The price of Bitcoin and altcoins could continue to face downward pressure if the trade war tensions persist, or if market participants believe that a recession or financial crisis is imminent. On the other hand, any signs of stabilization in the global economy, or a resolution to the tariff disputes, could provide relief and spark a market rebound.

For now, the crypto market seems to be caught in a cycle of fear and uncertainty, with Bitcoin and its peers under significant strain. Investors should remain cautious and keep an eye on global developments that could influence the market’s direction.