Why is the crypto market down today? Trump's tariffs cause trouble

New U.S. tariffs on China, Mexico, and Canada trigger geopolitical tensions, prompting retaliatory trade restrictions.
VIX surges 54%, signaling heightened market fear and risk-off sentiment among investors.

The cryptocurrency market took a sudden dive today, with Bitcoin [BTC] slipping to around $83,591 and losing most of the gains it made after Donald Trump announced plans for a U.S. strategic crypto reserve.

This downturn unfolded as financial markets reacted to heightened geopolitical tensions, newly imposed American trade tariffs, and China’s retaliatory measures against U.S. businesses.

Tariff trouble: Was a crash inevitable?

Trump’s suggestion of a U.S. crypto reserve had initially sent Bitcoin soaring above $95,000, fueled by optimism that official support would strengthen the sector.

Also, announcements were made for plans to build five semiconductor facilities in Arizona, increase TSMC’s total U.S. investment to $165 billion, and generate “hundreds of billions of dollars” in economic activity.

Investors saw this as a signal of strong government backing for the technology and crypto sectors, pushing Bitcoin prices.

That optimism faded once the White House announced fresh tariffs on China, Mexico, and Canada, heightening regulatory uncertainty and worsening the global economic outlook.

When Trump confirmed a 25% tariff on Canadian and Mexican goods, Canadian Prime Minister Justin Trudeau promised a forceful response, and Canada soon retaliated with a 25% levy on roughly $100 billion in American imports.

Trudeau issued a strong statement, affirming,

“Canada will not let this unjustified decision go unanswered.”

On 4th of March, China added 15 American companies to its export control list, limiting the flow of critical technologies to those firms and signaling a new round of trade friction.

How bad did it get?

Investor anxiety over these policies rippled through stock markets. On 3rd of March, the S&P 500 lost 1.8%, while the Nasdaq sank 9% from its December peak.

The Dow Jones briefly tumbled by 1,100 points after gaining 300 points earlier that day.

Technology and consumer cyclical stocks faced the heaviest losses, with NVIDIA sliding 9.46%, Broadcom losing nearly 6%, and Microsoft declining 2.41%. Amazon and Tesla also dropped more than 3%.

Source: FinViz

During this turmoil, the Volatility Index (VIX)—often called the “fear gauge”—jumped 54% since mid-February, reflecting deep concern about the impact of trade policy and regulatory shifts.

Unsurprisingly, the slide in equities spilled over into cryptocurrencies as traders reduced exposure to riskier holdings.

Source: TradingView

Trump’s 2nd of March announcement that the planned U.S. Crypto Strategic Reserve would include Bitcoin, Ethereum [ETH], and several altcoins initially ignited a surge in digital assets.

Bitcoin raced as high as $95,000 before the rally lost steam, plunging to $86,334.49 on Monday, an 8.31% drop from its weekend peak.

Source: TradingView

Ethereum, which had also gained momentum, reversed course and posted a 14.88% decline.

Growing fears of economic slowdown further added pressure. The Atlanta Federal Reserve’s GDPNow forecast for the first quarter of 2025 has significantly decreased from +3.9% to -2.8% in just one month.

This drastic drop indicates a worsening economic outlook.

Source: X

As a result of the negative economic forecast, investors are seeking safer investments, such as 10-year Treasury bonds. This increased demand has driven the 10-year Treasury yield down to 4.178%.

The combination of economic slowdown fears and the significant drop in the GDP forecast has created uncertainty in the market and led investors to seek safer assets.

Once soaring, now sinking

By 4th of March, during press time, Bitcoin had slipped to $83,925.46, ending its recent upswing. Exchange netflows, a metric tracking Bitcoin transfers in and out of trading platforms, highlighted a shift in trader behavior.

Source: CryptoQuant

From 2nd of March to 3rd of March, outflows of more than 2,000 BTC on each day suggested accumulation by long-term holders.

However, netflows turned positive on 4th of March, indicating that some investors were returning Bitcoin to exchanges, possibly to lock in profits or guard against further price drops.

Source: CryptoQuant

CryptoQuant’s Spent Output Profit Ratio (SOPR) supported this trend, declining from 1.0106 on 2nd of March to 0.994 on 4th of March.

This shift implies that traders who had gained from the brief rally were now exiting positions below their initial entry points.

What are traders feeling?

Market sentiment deteriorated rapidly, and the Fear & Greed Index sank to 15. This reflects “extreme fear” comparable to previous market crashes. In these crashes, leveraged positions and panic selling deepened losses.

Coinglass data showed that 297,653 traders were liquidated in the last 24 hours, resulting in $1.01 billion in liquidations. The most significant of these was a $13.4 million liquidation on Bitfinex.

Source: CoinGlass

The turmoil also caught the attention of political observers.

Ki Young Ju, CEO of CryptoQuant, described how the U.S. government seems to be treating cryptocurrency as a geopolitical instrument,

“The crypto market is increasingly becoming a weapon of the United States. Since Trump’s election, universal moral standards have declined. Now, if something benefits Trump and serves U.S. national interests, it is no longer considered illegal.”

Where do we go from here?

Overall, the crypto market’s downturn can be traced to several interwoven factors: geopolitical uncertainty, massive liquidations, and rapidly changing investor sentiment.

The introduction of new tariffs on China, Mexico, and Canada triggered stock market declines and rippled into digital assets.

With the Fear & Greed Index sitting at 15 and liquidations exceeding $1 billion, the environment remains fraught.

As Bitcoin hovers around $83,400, traders are watching closely to see whether the market finds stable footing or heads for a deeper slump.

The coming days will be critical in determining whether this pullback is a brief correction or the start of a prolonged downturn.

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New U.S. tariffs on China, Mexico, and Canada trigger geopolitical tensions, prompting retaliatory trade restrictions.
VIX surges 54%, signaling heightened market fear and risk-off sentiment among investors.

This downturn unfolded as financial markets reacted to heightened geopolitical tensions, newly imposed American trade tariffs, and China’s retaliatory measures against U.S. businesses.

Tariff trouble: Was a crash inevitable?

Trump’s suggestion of a U.S. crypto reserve had initially sent Bitcoin soaring above $95,000, fueled by optimism that official support would strengthen the sector.

Investors saw this as a signal of strong government backing for the technology and crypto sectors, pushing Bitcoin prices.

That optimism faded once the White House announced fresh tariffs on China, Mexico, and Canada, heightening regulatory uncertainty and worsening the global economic outlook.

Trudeau issued a strong statement, affirming,

“Canada will not let this unjustified decision go unanswered.”

On 4th of March, China added 15 American companies to its export control list, limiting the flow of critical technologies to those firms and signaling a new round of trade friction.

How bad did it get?

Investor anxiety over these policies rippled through stock markets. On 3rd of March, the S&P 500 lost 1.8%, while the Nasdaq sank 9% from its December peak.

The Dow Jones briefly tumbled by 1,100 points after gaining 300 points earlier that day.

Technology and consumer cyclical stocks faced the heaviest losses, with NVIDIA sliding 9.46%, Broadcom losing nearly 6%, and Microsoft declining 2.41%. Amazon and Tesla also dropped more than 3%.

Source: FinViz

During this turmoil, the Volatility Index (VIX)—often called the “fear gauge”—jumped 54% since mid-February, reflecting deep concern about the impact of trade policy and regulatory shifts.

Unsurprisingly, the slide in equities spilled over into cryptocurrencies as traders reduced exposure to riskier holdings.

Source: TradingView

Trump’s 2nd of March announcement that the planned U.S. Crypto Strategic Reserve would include Bitcoin, Ethereum [ETH], and several altcoins initially ignited a surge in digital assets.

Bitcoin raced as high as $95,000 before the rally lost steam, plunging to $86,334.49 on Monday, an 8.31% drop from its weekend peak.

Source: TradingView

Ethereum, which had also gained momentum, reversed course and posted a 14.88% decline.

This drastic drop indicates a worsening economic outlook.

Source: X

As a result of the negative economic forecast, investors are seeking safer investments, such as 10-year Treasury bonds. This increased demand has driven the 10-year Treasury yield down to 4.178%.

The combination of economic slowdown fears and the significant drop in the GDP forecast has created uncertainty in the market and led investors to seek safer assets.

Once soaring, now sinking

Source: CryptoQuant

From 2nd of March to 3rd of March, outflows of more than 2,000 BTC on each day suggested accumulation by long-term holders.

However, netflows turned positive on 4th of March, indicating that some investors were returning Bitcoin to exchanges, possibly to lock in profits or guard against further price drops.

Source: CryptoQuant

CryptoQuant’s Spent Output Profit Ratio (SOPR) supported this trend, declining from 1.0106 on 2nd of March to 0.994 on 4th of March.

This shift implies that traders who had gained from the brief rally were now exiting positions below their initial entry points.

What are traders feeling?

Coinglass data showed that 297,653 traders were liquidated in the last 24 hours, resulting in $1.01 billion in liquidations. The most significant of these was a $13.4 million liquidation on Bitfinex.

Source: CoinGlass

The turmoil also caught the attention of political observers.

Ki Young Ju, CEO of CryptoQuant, described how the U.S. government seems to be treating cryptocurrency as a geopolitical instrument,

“The crypto market is increasingly becoming a weapon of the United States. Since Trump’s election, universal moral standards have declined. Now, if something benefits Trump and serves U.S. national interests, it is no longer considered illegal.”

Where do we go from here?

Overall, the crypto market’s downturn can be traced to several interwoven factors: geopolitical uncertainty, massive liquidations, and rapidly changing investor sentiment.

The introduction of new tariffs on China, Mexico, and Canada triggered stock market declines and rippled into digital assets.

With the Fear & Greed Index sitting at 15 and liquidations exceeding $1 billion, the environment remains fraught.

As Bitcoin hovers around $83,400, traders are watching closely to see whether the market finds stable footing or heads for a deeper slump.

The coming days will be critical in determining whether this pullback is a brief correction or the start of a prolonged downturn.