Donald Trump’s decision to impose tariffs on imports from Canada, Mexico, and China triggered a sharp decline in both bitcoin and broader equity markets on Monday. Cryptocurrency majors initially surged up to 20%, fueled by a buy-the-dip strategy following Monday’s $2.2 billion liquidation. However, those gains quickly reversed as China announced retaliatory tariffs on the U.S.
The positive momentum seen during the recovery period was short-lived, as markets pulled back during the Asian morning hours. This shift occurred as the deadline for additional U.S. tariffs on China passed without a resolution. Despite the setback, XRP, dogecoin (DOGE), Solana (SOL), and Cardano (ADA) remained up nearly 3%, while Bitcoin (BTC) and ether (ETH) increased by almost 4%.
Ben El-Baz, Managing Director of HashKey Global, explained in a message to CoinDesk, “The U.S.-China tariff conflict could dampen the appetite for risk assets, further impacting the optimism that has been propelling the crypto bull market over the past year.” However, he added, “The impact from the tariffs could be temporary if crypto-friendly policies are introduced in the U.S.”
Traders remain divided on the long-term implications of China’s retaliatory measures, as markets await either a reversal of the actions or a prolonged downturn if further punitive measures are imposed by the Trump administration.
Min Jung, research analyst at Prestro Research, stated in a message to CoinDesk, “Despite Bitcoin being viewed as digital gold by many, it still behaves like a risk asset. As such, China’s retaliatory 10% tariff on the U.S. is weighing on crypto, much like it is on equities and other risk assets.”
Jung continued, “While today’s initial response may have been an overreaction, we can expect heightened volatility as markets adjust to ongoing developments. The key question now is whether this move is part of a negotiation strategy that will eventually be reversed, similar to the situation with Canada and Mexico, or if it marks the beginning of a long-term trade conflict, given Trump’s focus on China.”
The tariff announcement on Monday led to a significant liquidation event, providing a “buy-the-dip” opportunity for traders. Analysts noted that the uncertainty prompted increased interest in dollar-backed stablecoins as a hedge against economic and currency volatility.
However, with potential retaliatory measures from the affected countries, a broader trade war could spark additional volatility, further impacting the crypto market in the coming days.
