Why the Crypto Market is Up Today: Tariff Delay Fuels Investor Optimism

The cryptocurrency market experienced a significant rebound today, following a sell-off that had driven its overall valuation to the lowest levels seen since November 2024. As of March 6, the global cryptocurrency market capitalization surged to $3.10 trillion, marking a 5% increase over the last 24 hours. Leading the rally, Bitcoin (BTC) and Ethereum (ETH) both saw impressive daily gains of 5.6%, reaching $90,802 and $2,285, respectively.

Bitcoin’s Rally: Trump’s Tariff Delay Eases Investor Concerns

The recovery in the crypto market aligns closely with gains seen in the US stock market, which was boosted by news that former US President Donald Trump had delayed proposed tariffs on auto imports from Mexico and Canada. The tariff delay helped calm investor concerns, easing the macroeconomic pressures that had contributed to a recent downturn in risk assets, including cryptocurrencies.

On March 5, Trump announced that he would temporarily pause the proposed 25% tariffs on auto imports from Canada and Mexico, a move that immediately quelled fears of an impending trade war. The tariffs, which had been initially confirmed earlier in the week, had caused a sell-off in global markets, dragging down risk assets like Bitcoin and Ethereum. Bitcoin, for example, dipped below $90,000 on March 3 due to the uncertainty.

However, after negotiations with Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum, Trump agreed to a 30-day delay. This news brought relief to investors, spurring a “risk-on” sentiment that led Bitcoin to climb back above $92,000 and Ethereum to edge over $2,300.

A Shift Toward Risk-On Sentiment

The rally in the cryptocurrency market mirrors the broader market sentiment, which was bolstered by the tariff delay. The S&P 500 rose by 1.5%, while the tech-heavy Nasdaq gained 1.2% during the late New York trading session on March 5. Crypto-related stocks also saw notable gains, with Coinbase (COIN) rising by 4.5% and MicroStrategy (MSTR) surging nearly 12%.

Further supporting this optimistic mood, the US dollar index (DXY) is currently at its weakest level since early November, down more than 5.5% from its peak in mid-January. Expectations surrounding the Federal Reserve’s interest rate decisions have also shifted, with markets now pricing in a higher likelihood of rate cuts in 2025. Currently, there’s a 52% chance of a 25-basis-point rate cut in June, reflecting growing expectations for monetary easing.

Crypto Market Technical Rebound

From a technical perspective, the recent gains in the crypto market are part of a broader rebound that started from a key support level around the $2.80 trillion mark, which coincides with the 200-day simple moving average (SMA). The total market cap, now at $2.95 trillion, is eyeing a breakout above the resistance zone between $3.1 trillion and $3.28 trillion, where both the 100-day and 50-day SMAs are located.

A successful breakout above this resistance would signal a bullish shift, potentially leading to new all-time highs above $3.69 trillion. Additionally, the daily relative strength index (RSI) has surged from an oversold condition of 25 on February 20 to its current level of 47, indicating growing bullish momentum and suggesting the market may be gearing up for further gains.

Conclusion

Today’s rally in the cryptocurrency market is driven by easing global trade tensions, a weakening US dollar, and growing expectations for economic easing, all of which have helped boost investor sentiment. As the market pushes toward resistance levels, technical indicators suggest that the crypto sector may continue its upward trajectory, potentially reaching new highs in the near future.