Trump's Tariff Policy Triggers Cryptocurrency Crash: Market Risk Aversion Intensifies, Bitcoin Falls Below $75,000

Trump's Tariff Policy Triggers Cryptocurrency Crash: Market Risk Aversion Intensifies, Bitcoin Falls Below $75,000The global financial markets plunged into turmoil following US President Trump's announcement of reciprocal tariffs, and the cryptocurrency market suffered a significant blow, almost erasing all gains made since Trump's election victory in early November last year. This event prompted a reassessment of cryptocurrency's safe-haven attributes and underscored the close relationship between the crypto market and traditional financial markets

Trump's Tariff Policy Triggers Cryptocurrency Crash: Market Risk Aversion Intensifies, Bitcoin Falls Below $75,000

The global financial markets plunged into turmoil following US President Trump's announcement of reciprocal tariffs, and the cryptocurrency market suffered a significant blow, almost erasing all gains made since Trump's election victory in early November last year. This event prompted a reassessment of cryptocurrency's safe-haven attributes and underscored the close relationship between the crypto market and traditional financial markets.

During his campaign, Trump had promised policies favorable to the cryptocurrency industry, partly fueling the market's previous upswing. However, his latest tariff policy delivered a major shock. On Monday, the price of Bitcoin briefly fell below the $75,000 mark for the first time since November 7th of the previous year, experiencing a maximum drop of 5.3%. Data from CoinGecko showed that the total market capitalization of all cryptocurrencies declined by approximately 12%, falling to $2.47 trillion almost returning to the levels seen on the day of Trump's election. Ethereum's price also plummeted to its lowest point since March 2023.

This cryptocurrency market crash occurred against a backdrop of Trump's increasingly hawkish stance on tariffs. His policies have already caused global stock markets to lose trillions of dollars in market capitalization. The market had previously hoped that cryptocurrencies would demonstrate greater resilience than other assets, but this hope was ultimately dashed.

"For a time, the crypto market seemed to hold steady, but with the crypto market trading 24/7, investors woke up on Sunday to a full-blown sell-off," noted Charlie Sherry, Head of Finance and Crypto Analyst at BTCMarkets, in a research briefing. Market panic spread, leading to a large-scale sell-off of crypto assets.

Data reveals that approximately $868 million in long cryptocurrency contracts were liquidated in the past 24 hours, marking the highest level in nearly six weeks. This data clearly reflects the sharp increase in bearish sentiment. Sean McNulty, Head of APAC Derivatives at digital asset brokerage FalconX, stated that options market data suggests that selling pressure may continue, with demand for put options significantly rising. He pointed out that key support levels for Bitcoin and Ethereum are $75,000 and $1500, respectively.

According to data from derivatives exchange Deribit, the open interest in Bitcoin put options with a strike price of $70,000 is currently higher than any other contract, further highlighting the market's concern about further downside risk and the sharp increase in investor demand for safe-haven assets.

Initially, upon the announcement of Trump's reciprocal tariffs, cryptocurrency assets showed some resilience, with the market briefly anticipating that they could escape the "gravitational pull" of tech stocks and remain independent of traditional financial market fluctuations. However, Monday's crash indicated that the high positive correlation between cryptocurrencies and the Nasdaq 100 index, which has persisted since the COVID-19 pandemic, may continue. This means that the cryptocurrency market still struggles to fully detach from the influence of traditional financial markets; its price fluctuations are closely linked to the macroeconomic environment and global market sentiment.

Julia Zhou, COO of crypto market maker Caladan, stated: "Crypto assets are typically leading indicators for risk assets, and we expect a more significant adjustment in the market after the US stock market opens." This suggests that the further decline in the cryptocurrency market may foreshadow a more severe impact on traditional financial markets.

This cryptocurrency market crash not only reflects market concerns about Trump's tariff policy but also serves as a reminder that the cryptocurrency market is not entirely independent of traditional financial markets. Price fluctuations are significantly impacted by the macroeconomic environment and global market sentiment. Market participants need to closely monitor global economic conditions and thoroughly assess risks to cope with potential market volatility. This event also reinforces the importance of risk management in cryptocurrency investment. Investors should develop sound investment strategies and adjust their positions in response to market changes to mitigate investment risks.

The full impact of Trump's tariff policy has yet to be seen, and its future development will continue to affect global financial markets, including the cryptocurrency market. Market participants need to closely monitor policy changes and continuously assess potential risks. This crash also reminds investors of the high volatility of the cryptocurrency market and its correlation with traditional financial markets. A cautious investment strategy and risk management are crucial for investors involved in the cryptocurrency market. Future market trends remain uncertain, and investors should remain vigilant, invest rationally, and make prudent decisions. Closely monitoring macroeconomic conditions and global market sentiment will help investors better understand and respond to market fluctuations.

This event warrants deeper reflection on the nature and future direction of the cryptocurrency market. While cryptocurrencies possess decentralized and censorship-resistant features, their price volatility remains high, and they are closely linked to traditional financial markets. Balancing the innovation and risk of cryptocurrencies remains a crucial subject requiring further research and discussion. Improved regulatory policies and rational behavior by market participants will play vital roles in the healthy development of the cryptocurrency market. Only in a more mature and regulated market environment can cryptocurrencies better realize their potential and make positive contributions to the global financial system. Investors must also improve their financial literacy and risk awareness to achieve sustainable returns in the cryptocurrency market. Future cryptocurrency market development will be affected by multiple factors, requiring investors to maintain a long-term perspective, rationally view market fluctuations, and proactively learn and adapt to market changes.

Continuously monitoring global economic conditions and policy changes is crucial for investors to accurately judge market trends. Only by deeply understanding market mechanisms and risk factors can they develop more scientific and rational investment strategies, reduce investment risks, and ultimately achieve desirable investment returns. Strengthening regulation and improving market mechanisms are also key to ensuring the healthy development of the cryptocurrency market and protecting investor rights. In the future, the cryptocurrency market will face more challenges and opportunities, requiring governments, regulatory agencies, and market participants to work together to build a more comprehensive and regulated market environment.