The cryptocurrency market experienced another Trump effect, with a sudden drop. Accordingly, Bitcoin (BTC) plummeted from around $95,000 to $92,000 within a few hours.
This decline also affected altcoins, with major altcoins such as Ethereum (ETH), XRP, and Solana (SOL) losing 3%, 4.4%, and 6.3% respectively.
This decline is attributed to US President Donald Trump’s threats to impose tariffs in an attempt to acquire Greenland.
Bitcoin, Trump, and Tariffs
Bitcoin prices experienced a sharp drop after President Trump threatened to impose new tariffs on eight European countries as part of his efforts to buy Greenland.
Trump’s move triggered a sell-off in Bitcoin and altcoins, while traditional safe-haven assets like gold and silver rose in value.
President Trump announced on Saturday that a 10% tariff would be applied to imports from eight NATO allies (Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland) from February 1 until June.
Trump also warned that if no deal is reached for Greenland, the rate could rise to 25% by June.
Renewed trade war fears have driven down Bitcoin and altcoins, triggering risk aversion and leading to the liquidation of $860 million worth of BTC long positions in the last 24 hours.
Speaking to The Block, Presto Research analyst Min Jung said, "The crypto market continues to show weakness compared to other asset classes. While US-EU trade war concerns are significantly impacting crypto market sentiment, other risky assets, including KOSPI, are showing gains. This indicates that crypto-specific weakness persists and investors are preferring other risky assets. This is a recurring theme, with crypto lagging behind while most markets rise."
The Bitcoin Decline Had Already Begun
Rachael Lucas, an analyst at BTC Markets, said that the decline in Bitcoin and altcoins was not due to concerns about the US-EU trade war, but rather brought a new wave of downturns to an already nervous market.
“The US-EU tax tension added a layer of geopolitical uncertainty that markets couldn’t handle. While the tax news is being widely discussed, it’s not the main driving force behind the current pullback in crypto.”
Lucas stated that the crypto market had already begun to deteriorate following the suspension of the US cryptocurrency market structure bill.
Following Coinbase’s withdrawal of support for the bill, the Senate Banking Committee indefinitely postponed its consideration.
Finally, Lucas stated that the decline in Bitcoin was also due to profit-taking, adding, "Meanwhile, the recent break below the 50-week moving average in Bitcoin triggered algorithmic selling."
Lucas also added that if these macroeconomic pressures continue, Bitcoin could fall to the $67,000 to $74,000 range in the coming days.
While Lucas warned of a decline, he also added that these drops were unlike past crypto winters.