In the past 24 hours, the cryptocurrency market has demonstrated its characteristic volatility, with major cryptocurrencies surging as much as 20% before a significant reversal. This fluctuation appears to be a direct response to Monday’s substantial $2.2 billion sell-off which turned profitable for risk-takers who employed a buy-the-dip strategy. However, the bullish gains quickly evaporated following China’s announcement of retaliatory tariffs against the U.S.
The initial surge faced a pullback during the Asian markets, coinciding with the missed deadline for the U.S. to impose additional tariffs on China. Despite this, notable cryptocurrencies including XRP, Dogecoin (DOGE), Solana’s SOL, and Cardano’s ADA experienced approximately 3% gains, while Bitcoin (BTC) and Ethereum (ETH) climbed nearly 4% higher.
Ben El-Baz, Managing Director of HashKey Global, articulated a cautious outlook on the situation, stating, “The U.S.-China tariff conflict could decrease the appetite for risk assets and further impact the positive sentiment that has been fueling a bull market in the crypto industry over the past year.” He added that the damage from these tariffs could be mitigated by the introduction of more crypto-friendly policies in the U.S.
The crypto trading community remains divided on the long-term ramifications of China’s retaliatory measures. Speculation looms over whether these decisions will trigger a market reversal or a sustained downturn if further actions are pursued under the Trump administration.
Min Jung, a research analyst at Prestro Research, noted, “Despite more people considering Bitcoin as digital gold, it still largely trades like a risk asset. As a result, China’s retaliatory 10% tariff on the U.S. is pressuring crypto, much like other global risk assets such as equities.” Jung posits that while today’s market reaction might showcase an overreaction, heightened volatility is plausible as traders absorb ongoing developments.
The tariff imposition instigated a buzz within the trading community as investors pivoted attention from Trump’s previous pro-crypto stance to the looming economic implications. On Monday, the significant liquidation event presented a timely “buy-the-dip” opportunity as reported by CoinDesk, igniting interest in dollar-backed stablecoins as a hedge against escalating economic uncertainty and currency fluctuations.
However, the unfolding trade tensions have the potential to prompt retaliatory strategies from the affected countries, which may ignite a broader trade war and result in increased volatility within the crypto market in the days ahead. As the situation evolves, market participants remain attentive to the balance between risk appetite and economic realities.
