Market Caution Amid New Tariffs and Economic Uncertainty
A new wave of tariffs introduced by U.S. President Donald Trump, coupled with a lack of immediate catalysts, is causing market participants to exercise caution. Analysts believe that Ethereum’s native cryptocurrency, ether (ETH), might be particularly vulnerable to these developments.
On Sunday, Trump announced plans to impose a substantial 25% tariff on all steel and aluminum imports into the United States, in addition to existing duties. He indicated that reciprocal tariffs would also be implemented later in the week, affecting all countries.
This aggressive rhetoric, alongside a rise in inflation expectations, has the potential to incite downward volatility in the markets. A significant indicator that previously predicted a surge above $100,000 for Bitcoin—when it was trading below $70,000—turned bearish on Sunday, adding to the sense of unease.
As of Monday afternoon in Europe, major cryptocurrencies exhibited little change, while U.S. futures, including the Dow and S&P 500, rose by 0.46% in anticipation of the New York market opening. Bitcoin, ether, XRP, Solana’s SOL, and dogecoin (DOGE) all gained less than 1% over the past 24 hours. In contrast, BNB Chain’s BNB experienced a decline of 4.5% following a Sunday rally.
The introduction of tariffs brings significant economic uncertainty, potentially escalating trade wars and leading to increased market volatility. Such developments typically influence Bitcoin and the broader cryptocurrency market, as investors often retreat from riskier assets in favor of safer investments.
Some traders suggest that ether may be even more affected, as overall sentiment for cryptocurrencies appears to be waning. This is particularly concerning for ETH, which has already faced a challenging year marked by a notable decline in the widely-observed Bitcoin-ether ratio, falling to levels not seen since 2021. This shift indicates a preference for BTC over ETH.
A decline in ETH could also spell trouble for associated beta investments, such as the memecoin dogecoin (DOGE) and various Ethereum-based DeFi tokens, which tend to closely follow the performance of their parent asset. Augustine Fan, head of insights at SignalPlus, commented, “The rise of BTC compared to everything else is most evident when looking at ETH, which is now facing record short-interest and fear, uncertainty, and doubt (FUD). The second-largest token is down 23% year-to-date, while BTC has seen a modest gain of 2.5%.”
He further elaborated, “At the risk of sounding repetitive, the absence of Layer 1 catalysts and a lack of narrative leadership will likely continue to weigh heavily on Ethereum in the foreseeable future.”
Nick Ruck, director at LVRG Research, echoed these sentiments, stating, “Ethereum has been particularly hard-hit, having reversed all gains from its late November rally, leaving holders with significant losses.” He attributed this to rising inflation expectations, which have led investors to anticipate only a single interest rate cut by the Federal Reserve this year, casting a bleak outlook for risk assets, including cryptocurrencies.
Meanwhile, traders at Singapore-based QCP Capital predict that crypto markets will experience fluctuations in the coming weeks, driven by the ongoing impact of Trump’s statements. “A feedback loop is forming—President Trump, who is highly sensitive to market reactions, is facing a market that is increasingly calling his bluff. This could further embolden him, introducing another layer of volatility,” the firm stated in a broadcast message on Monday.
They concluded, “Currently, BTC volatility skews favorably towards puts until April, reflecting a dearth of upside catalysts.”
