Cryptocurrency prices drop as risk sentiment sours

Bitcoin price continued to decline on Tuesday, dropping below the $93,500 level briefly but pared some losses later, bouncing back to $95,500. If BTC price declines, support can be found at $93,000, while resistance may be encountered at $98,700. 

Ethereum price also dipped on Tuesday, dropping from $2,750 to $2,660. If Ethereum's price declines, it may encounter support near $2,540, while if it increases, resistance may be encountered near $2,840.

Bitcoin price registered a new all-time high of $109,880 in January but has since been under pressure by increased risk aversion sentiment. Most major cryptocurrencies are under pressure on concerns that US President Donald Trump’s trade policies may start global trading wars. 

Trump has been using threats of imposing trade tariffs as a negotiation tool to further his agenda with other countries. The uncertainty over Trump’s future policies and trade tariffs is generating a risk aversion sentiment, putting pressure on crypto markets.

Trump has threatened that he will announce reciprocal tariffs on many countries, which would raise US import taxes to match those imposed by the country’s other trading partners. On Tuesday, Trump threatened to impose 25% tariffs on foreign cars and semiconductor chips. If Trump goes through with these heavy tariffs, global inflation is likely to rise and the economic outlook will worsen, thus promoting a risk aversion sentiment, which puts pressure on crypto markets.

US President Donald Trump and Russian President Vladimir Putin met in Riyadh, Saudi Arabia on Tuesday, but the meeting was fruitless, driving risk sentiment down. Hopes that the crisis between Russia and Ukraine might finally end, however, dropped as Ukrainian President Volodymyr Zelenskiy refused to attend the meeting. Zelenskiy stated that fair negotiations to end the war should involve Ukraine and the EU. The Russian side has also toughened its stance, stating that further meetings between Trump and Putin are not currently necessary due to unresolved Russian demands regarding Ukraine’s pending membership in NATO.

Trump’s proposed plans for building a Bitcoin strategic reserve have been boosting Bitcoin price. Growing expectations that the US government will adopt a pro-crypto regulatory and fiscal policy are boosting crypto markets. 

Cryptocurrency prices are also affected by central banks’ interest rates. High interest rates stifle economic growth, putting pressure on crypto markets. The US Federal Reserve held interest rates steady at its January meeting, after delivering three consecutive rate cuts in 2024. FOMC policymakers voted unanimously to maintain the federal funds range to a target range of 4.25% to 4.50. 

Fed Chair Jerome Powell delivered a mildly hawkish message after the policy meeting. Powell stated that the Fed’s approach will remain data-driven and stressed that the central bank needs to consider potential policy changes under Trump’s administration.

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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