Crypto Market Sentiment Plunges into "Extreme Fear" Amid Trump’s Tariff Remarks

The cryptocurrency market has seen a sharp decline in sentiment, with the Crypto Fear & Greed Index plunging into the “Extreme Fear” zone. This downturn coincides with a broader market slump, as U.S. President Donald Trump reaffirmed his plans to implement 25% tariffs on imports from Canada and Mexico.

Market Sentiment Hits "Extreme Fear"

On February 25, the Crypto Fear & Greed Index dropped to 25 points, signaling "Extreme Fear" within the market. This represents a significant 24-point decrease from the previous day, when the index stood at 49, reflecting a “Neutral” market sentiment. The sudden plunge in sentiment aligns with growing concerns over President Trump’s trade policies, which have raised the stakes for both the traditional and crypto markets.

Tariff Announcement Sparks Market Reaction

The sharp decline in crypto sentiment came after President Trump reiterated during a February 24 press conference with French President Emmanuel Macron that his planned 25% tariffs on Canada and Mexico were moving forward as scheduled. Initially announced on February 1, the tariffs include a 25% tax on imports from both countries, except for Canadian energy imports, which will face a 10% tariff. Imports from China would also be subject to a 10% tariff.

The news triggered significant market turbulence, especially for Bitcoin, which saw a drop from around $105,000 to approximately $92,900 in the days following Trump’s announcement. Meanwhile, Ethereum (ETH) faced heavy sell-offs, with over $2.2 billion worth of ETH liquidated as traders anticipated the possibility of a trade war. Leaders from Canada and Mexico have vowed to retaliate with their own tariffs, further heightening concerns.

Tariff Pause and Market Volatility

Trump’s tariff plans were briefly paused on February 3, as he agreed to delay the implementation for 30 days after Canada and Mexico promised to enhance border protections. However, the recent reaffirmation of the tariffs signals that they are set to resume when the pause ends early next month. This uncertainty surrounding trade relations has added to the already fragile sentiment in the crypto market.

The broader financial markets have also been affected by Trump’s tariff policies. On February 9, Bitcoin experienced a drop following his announcement of a 25% tariff on aluminum and steel imports, and again on February 13, when he signed an executive order for sweeping reciprocal tariffs on foreign goods. The impact on cryptocurrencies has been clear, with Bitcoin's price falling in tandem with broader market concerns.

Crypto Market Struggles

Bitcoin, which has experienced a 4.5% drop in the past 24 hours, is now trading under $92,000, marking its lowest price since late November 2024. The wider cryptocurrency market has also suffered, with the total market capitalization declining nearly 8%, from over $3.31 trillion to approximately $3.09 trillion.

This significant drop in the market comes as traditional U.S. stock indices, such as the S&P 500, have also taken a hit. The S&P 500 has fallen by 2.3% over the last five trading days, while the Nasdaq Composite has dropped 4%, reflecting a broader sentiment of caution and uncertainty in global financial markets.

A Familiar Pattern of "Extreme Fear"

The last time the Crypto Fear & Greed Index entered the "Extreme Fear" zone—scoring 25 or lower—was on September 7, 2024, when Bitcoin saw a sharp dip to around $54,000 after a 7% drop over a two-day period. This historical pattern suggests that periods of heightened uncertainty, such as the one sparked by Trump’s tariff rhetoric, can trigger significant volatility in both traditional markets and cryptocurrencies alike.

Conclusion

The combination of President Trump’s reaffirmed tariff plans and broader market instability has created a perfect storm for crypto investors. The sharp decline in the Crypto Fear & Greed Index reflects the heightened anxiety surrounding the potential consequences of a trade war. With Bitcoin and other cryptocurrencies seeing sharp losses, investors are bracing for more volatility in the coming weeks, particularly as the tariffs are set to resume next month. The crypto market’s ability to recover will depend largely on both geopolitical developments and the broader economic landscape.