Crypto Market Reacts to U.S.-China Tariff Conflict
In a dramatic turn of events, major cryptocurrencies surged by as much as 20% in the last 24 hours, only to experience a reversal as traders employed a buy-the-dip strategy following a substantial $2.2 billion market movement on Monday. However, this euphoria was short-lived as China announced retaliatory tariffs on U.S. imports, causing a significant pullback in the crypto market.
The initial rise in prices was notably affected during the Asian morning hours after the deadline for the U.S. to impose additional tariffs on China passed without any new agreements being reached. As a result, cryptocurrencies like XRP, Dogecoin (DOGE), Solana’s SOL, and Cardano’s ADA saw increases of nearly 3%. Meanwhile, Bitcoin (BTC) and Ether (ETH) climbed nearly 4% higher during this brief period of optimism.
Ben El-Baz, the Managing Director of HashKey Global, shared insights with CoinDesk via Telegram, stating, “The U.S.-China tariff conflict could diminish the appetite for risk assets and further impact the positive sentiment that has been driving the bullish market in the crypto sector over the past year.” He also indicated that the adverse effects of the tariffs could be mitigated if the U.S. government were to introduce more crypto-friendly policies.
Despite the initial reactions, traders remain divided on the long-term implications of China’s retaliatory measures. The market sentiment is heavily influenced by the potential for a reversal or an extended downturn, particularly if further actions are taken against China under Trump’s administration. Min Jung, a research analyst at Prestro Research, commented, “Even though more individuals are starting to perceive Bitcoin as digital gold, it still behaves predominantly like a risk asset.” Jung elaborated that, “As a consequence, China’s 10% retaliatory tariff on the U.S. is exerting pressure on cryptocurrencies, similar to other global risk assets, including equities.”
Jung further explained that while the initial market response might have been an overreaction, heightened volatility is expected to persist as traders digest ongoing developments. “The critical question now is whether these actions are merely negotiation tactics that could eventually be rescinded—akin to what occurred with Canada and Mexico—or if they represent the onset of a prolonged trade conflict, especially since China has become a key target of Trump’s rhetoric,” Jung noted.
Trump’s imposition of tariffs on imports from Canada, Mexico, and China resulted in a sharp decline in Bitcoin and broader equity markets on Monday. This shift redirected investor focus from Trump’s previously pro-crypto stance to the immediate economic consequences of these tariffs. The significant liquidation event that occurred on Monday provided traders with a “buy-the-dip” opportunity. A CoinDesk analysis highlighted that the tariff announcements ignited interest in dollar-backed stablecoins as a protective measure against economic instability and currency fluctuations.
However, the potential for retaliatory actions from impacted nations raises concerns about the possibility of a wider trade war, which could exacerbate volatility in the crypto market in the forthcoming days.
