Bitcoin dips as Trump’s proposed tariffs dampen risk sentiment

Bitcoin price surged last week, reaching $99,500 on Friday for the first time in history and flirting with the $100,000 milestone. Bitcoin’s rally was halted over the weekend, however, and Bitcoin price dropped to $91,000 on Tuesday. If the BTC price declines, support can be found at $85,000, while resistance may be encountered at the psychological level of $90,000. 

Ethereum price also dipped on Tuesday, dropping below $3,300. If Ethereum's price declines, it may encounter support near $3,000, while if it increases, resistance may be encountered near $3,600.

Bitcoin had been riding the Trump trade flirting with the key $100,000 level last week. Bitcoin price slumped on Monday, however, and continued to decline on Tuesday. Bitcoin was just shy of reaching the $100,000 milestone last week and many traders rushed to realize their gains after Bitcoin’s rally was halted over the weekend. Most market analysts, however, predict that Bitcoin will resume its upward momentum and will breach the $100,000 barrier in a few days, especially if a risk-on sentiment continues to prevail in markets.

Crypto markets have been gaining strength since Donald Trump’s victory in the US Presidential elections. Trump has openly declared his support of crypto markets, announcing that he will make the US ‘the crypto capital of the planet’. Growing expectations that the new government will adopt a pro-crypto regulatory and fiscal policy have been boosting crypto markets, especially since Donald Trump announced plans to accumulate a national Bitcoin stockpile. In addition, Trump’s proposed tariffs and tax policies are expected to support economic growth, boosting high-risk assets, such as cryptocurrencies.

Concerns over Trump’s proposed tariffs, however, dampened risk sentiment on Tuesday. President-elect Donald Trump communicated more tariff measures on his social media. Trump stated that his administration would impose an additional 25% tariff on imports from Canada and Mexico, with an additional 10% to the 60% already announced during his election campaign on Chinese goods. 

Geopolitical concerns are promoting a risk aversion sentiment, lowering the appeal of high-risk assets such as cryptocurrencies. Risk sentiment dropped last week, as tensions between Russia and Ukraine flared. Tensions between Russia and Ukraine cooled over the weekend, however, boosting crypto markets. 

Reports that Israeli Prime Minister Benjamin Netanyahu has finally accepted a ceasefire deal with Lebanon boosted crypto markets on Tuesday, as geopolitical tensions are starting to cool. The deal will hopefully put an end to the 14-month conflict and has the potential to restore stability in the Middle East.

Cryptocurrency prices are also affected by central banks’ interest rates. High interest rates are restricting economic growth, putting pressure on risk assets, while the promise of rate cuts boosts crypto markets. Rate cut expectations have been fluctuating in the past couple of weeks, with the odds of a December rate cut at approximately 60%.

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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