Why Crypto Is Down: How Trump’s Policies Spark Market Panic

Crypto prices fell heavily in early February after Donald Trump announced new trade policies. In particular, he implemented additional tariffs on imports from Canada, Mexico, and China on February 1, 2025.

In response, the three countries announced they were preparing similar tariffs on US goods. This wasn’t all, however. Trump threatened the European Union with tariff increases, which, in turn, issued a statement saying it would react to protect the interests of European businesses, workers, and consumers.

These trade policies resulted in Bitcoin’s price decline of more than 13% since January 31. On February 2, BTC traded as low as $91,350.

This week, Bitcoin’s trading between $92,000 support and $102,200 resistance levels. At the time of writing, the price hovers at around $98,000. Ether trades at $2,700. However, we need to mention that Ether hasn’t been a top performer for a while.

Based on CoinMarketCap, the total crypto market cap stands at above $3.24 trillion compared to $3.74 trillion on January 20, 2025.

Why Trump’s Trade Policies Impact Crypto Prices  

Along with other macroeconomic factors, trade policy can influence global trade, economic growth, inflation, and market stability. Tariffs affect businesses, consumers, and investor sentiment, making them a key component that shapes financial markets, including crypto.

Trade tensions can slow down economic growth, reducing the availability of capital for investment in riskier assets like crypto. Higher tariffs increase the cost of goods, impacting businesses and consumer spending. If companies anticipate economic struggles, they may pull back from speculative investments, including Bitcoin and altcoins.

Crypto markets are also influenced by institutional investors, many of whom treat Bitcoin and other digital assets similarly to traditional stocks. When trade wars threaten stock market stability, these investors often reduce their exposure to all risk assets, including crypto. This contributes to downward pressure on prices, as seen in Bitcoin’s drop following the tariff announcements.

When tariffs are raised or introduced, they create instability, which can cause volatility in traditional financial markets. As the saying goes, “Markets don’t like uncertainty,” and recent price fluctuations show just how true that is. 

The overall market instability and the threat of an economic slowdown outweighed any potential shift to crypto as a safe haven, causing prices to drop.

During such times, investors often seek alternative assets, and while some may turn to crypto as a hedge, others might liquidate their holdings to cover losses in traditional markets. In the case of Trump’s recent trade policies, the reaction was largely negative, leading to a sell-off in Bitcoin and other cryptocurrencies.

Overall, the global economy seems to be undergoing big changes. If trade tensions continue to escalate, crypto prices may remain volatile, with Bitcoin and other assets reacting to macroeconomic trends rather than just industry-specific developments. 

The extent of this impact depends on how businesses and consumers adapt to new tariffs, how central banks respond, and whether geopolitical tensions ease or intensify.