Trump’s Tariffs Shake Crypto Markets Amid National Emergency Declaration

The cryptocurrency markets saw significant volatility following U.S. President Donald Trump's announcement of a national emergency and the imposition of sweeping tariffs on all countries involved in the ongoing trade war. Starting April 5, the U.S. will levy a 10% tariff on goods from all countries, with specific nations like China, the European Union, and Japan facing higher rates—34%, 20%, and 24%, respectively.

In a speech on April 2, Trump declared that the U.S. was charging "approximately half of what they are and have been charging us," referring to the new tariffs. Initially, the crypto market reacted positively to the announcement of the 10% tariff, seeing a brief surge. However, once the full extent of the tariff details was revealed, markets reversed course, resulting in a sharp dip across the board.

Market Reaction: Bitcoin and Ether Dip, But Recover Slightly

Bitcoin (BTC) had been experiencing an upward trend, reaching a session high of $88,500 before quickly dropping 2.6% to around $82,876 following the tariff news. Similarly, Ether (ETH) fell over 6% from $1,934 to $1,797. The overall cryptocurrency market capitalization also declined by 5.3%, dropping to $2.7 trillion. This sharp market correction sent the Crypto Fear & Greed Index into extreme fear territory, with a score of 25, signaling widespread market anxiety.

However, by mid-April 2, prices began to recover slightly. Bitcoin gained 0.8%, reaching $83,205, while Ether rebounded by 1.2%, returning to $1,810. Despite these small recoveries, the broader market sentiment remained volatile.

A Broader Economic Impact: Stock Market Declines as Well

The impact of Trump's tariffs was not limited to the cryptocurrency space. The stock markets also felt the pressure, with the S&P 500 index erasing over $2 trillion in market capitalization—equivalent to roughly $125 billion per minute, according to The Kobeissi Letter. The sharp market movements underscored the global economic uncertainties sparked by the tariff escalation.

The crypto Fear & Greed Index score has returned an average rating of fear for the last week but has now dipped to extreme fear. Source: Alternative.me

Tariffs and Certainty: A Double-Edged Sword for Crypto Markets

Despite the initial volatility, some experts see potential long-term benefits for the markets. Rachael Lucas, a crypto analyst at Australian crypto exchange BTC Markets, noted that the initial surge in crypto prices likely reflected "uncertainty relief," followed by a sell-off once the full tariff details were made public.

"On BTC Markets, trading volume surged 46% as local traders scrambled to reposition. Big players took profit on the spike, while smaller investors hesitated," Lucas explained, emphasizing that if major trading partners like China or the European Union retaliate harshly, further panic selling could follow.

U.S. Treasury Secretary Scott Bessent also weighed in, advising U.S. trading partners against retaliatory measures. In an interview with Bloomberg, Bessent argued that the current tariff rates represented "the high end of the number," suggesting that additional levies would not be likely, which could bring stability and certainty to the markets.

Source: Daan Crypto Trades

Looking Ahead: Institutional Investors May Find Opportunities

David Hernandez, a crypto investment specialist at 21Shares, echoed this sentiment, stating that while the tariff rates were slightly higher than anticipated, the clarity brought about by Trump’s announcement could ultimately benefit the market in the long run. "Markets thrive on certainty, and with speculation largely removed, institutional investors may see an opportunity in the coming days to take advantage of compressed valuations," Hernandez noted.

However, Hernandez emphasized that the global response to these tariffs will be crucial. He speculated that countries like Mexico, China, South Korea, and Japan may be evaluating countermeasures, which could influence the broader market sentiment in the coming weeks.

Conclusion: Uncertainty Lingers, But Opportunities May Arise

The immediate market reaction to Trump’s tariffs and national emergency declaration highlights the significant volatility facing both traditional financial markets and cryptocurrencies. While the market is still reeling from the uncertainty, the clarity of tariff policies could open up opportunities for institutional investors in the coming days. However, global responses will be key, as retaliatory actions by key economic players could continue to drive market fluctuations in the near future.