NAIROBI (CoinChapter.com)— Cryptocurrency markets are reeling after former U.S. President Donald Trump imposed new tariffs on major trading partners. Bitcoin (BTC) dropped to a three-week low of $91,441.89, while Ethereum (ETH) dipped to $2,331.05 before partially recovering. The latest round of trade tensions has injected volatility into financial markets, raising questions about whether this dip presents a buying opportunity for crypto traders.
Trump’s Tariffs Shake Markets, Strengthen the Dollar
The U.S. government imposed 25% tariffs on imports from Canada and Mexico, its two biggest trading partners, and a 10% duty on Chinese goods. The move sent shockwaves through global financial markets. Canada and Mexico immediately pledged retaliatory measures, while China vowed to challenge the tariffs at the World Trade Organization (WTO).
John Authers, a senior editor at Bloomberg, noted that markets had been in denial about the potential economic fallout, assuming Trump would not follow through. “Markets didn’t want to believe that Trump really meant broad tariffs because they’re such a plainly bad idea,” he wrote.
U.S Dollar surges on Trump tarrif. Source: TradingViewThe U.S. dollar strengthened as investors sought safe-haven assets amid the uncertainty. The euro weakened, and the Canadian dollar dropped to a two-decade low. Investors fear that these tariffs could escalate into a full-blown trade war, increasing inflationary pressures while slowing global growth.
Trade wars hurt all, benefit only China. Source: XLuxembourg’s Prime Minister Luc Frieden criticized the tariffs, saying, “Tariffs are bad for trade, bad for the U.S., and bad for those who seek tariffs imposed.” EU foreign policy chief Kaja Kallas echoed this sentiment, warning that China stands to benefit from the trade war.
Bitcoin Drops, but Its Role as a Macro Hedge Faces a Test
Historically, Bitcoin has been seen as a hedge against inflation and economic instability, but its latest price movements suggest a growing correlation with traditional financial markets. Over the past 65 days, Bitcoin has consolidated within a 15% range, mirroring patterns seen in U.S. equity markets.
BTC/USD 4H Chart. Source: BitfinexBitfinex Analysts have observed a double-top formation in both BTC and the S&P 500, suggesting that crypto traders are reacting to macroeconomic developments much like stock investors.
Bitcoin’s 30-day rolling correlation with the S&P 500 has climbed to 0.8, the highest level in five months. This suggests that BTC is increasingly behaving as a macro-driven risk asset, moving in tandem with equities rather than serving as an uncorrelated hedge.
Despite the decline, Bitcoin has still outperformed traditional markets since the U.S. election, rallying from $67,000 to over $100,000 at its peak. Institutional demand remains strong, with MicroStrategy acquiring another 10,107 BTC for $1.1 billion, reinforcing the long-term conviction in Bitcoin’s value.
Federal Reserve Policy and Inflation Risks Loom
Adding to market uncertainty, the Federal Reserve has signaled that it will keep interest rates at 4.25%-4.50% until inflation shows clear signs of cooling. Consumer spending surged in December, with real spending rising 0.4%, further reinforcing economic growth but complicating the Fed’s ability to ease monetary conditions.
Month-over-Month Percent Change in PCE Personal Consumption Expenditure) Price Index. Source: MacroMicro
Core Personal Consumption Expenditures (PCE) inflation remains at 2.8% year-over-year, above the Fed’s 2% target. A tight labor market and potential immigration restrictions could drive wages higher, adding to inflation risks. If inflation stays elevated, the Fed may delay rate cuts, potentially strengthening the dollar further and putting pressure on Bitcoin.
Will Bitcoin Bounce Back?
Bitcoin price drop to $91,170 on Monday tested key support at $90,994, a level that previously triggered rebounds. The ascending trendline from October remains intact, signaling potential recovery if BTC holds.
BTC/USD 1-day price chart. Source: TradingViewTechnical indicators show BTC below the 50-day EMA ($98,613) but still above the 200-day EMA ($83,027), reinforcing long-term bullish structure. If BTC reclaims the trendline, a bounce could follow.
Institutional accumulation continues, with MicroStrategy adding 10,107 BTC, and February’s historical 14% average return suggests seasonality favors recovery. Tether’s Lightning Network integration also strengthens Bitcoin’s adoption.
Bitcoin’s historical tendency to rebound after corrections, combined with strong technical and institutional support, suggests this dip could be a buying opportunity rather than the start of a prolonged downtrend. If BTC holds $90,994, the market could be positioned for a strong February recovery.
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