Crypto markets under pressure by Trump tariff concerns

Bitcoin price broke the $100,000 barrier early this week, rising above $102,500 in early trading on Tuesday. Bitcoin plummeted later in the week, however, dropping to $93,000 on Wednesday, as a risk aversion sentiment prevailed in markets. If BTC price declines, support can be found at $92,000, while resistance may be encountered at $103,000. 

Ethereum price also dipped on Wednesday, dropping from $3,400 to below $3,300. If Ethereum's price declines, it may encounter support near $3,200, while if it increases, resistance may be encountered near $3,740.

Bitcoin price registered a new all-time high of $108,200 in December after US President-elect Donald Trump confirmed plans to build a Bitcoin strategic reserve. Donald 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 reaffirmed his pre-election commitment to build a Bitcoin strategic reserve. 

Renewed expectations of the creation of a US Bitcoin reserve boosted Bitcoin price on Monday. Analysts at a Wall Street investment bank have put the odds of incoming US president Donald Trump creating a bitcoin reserve in 2025 at 60%, causing its price to surge above the key $100,000 level once more.

The uncertainty surrounding US President-elect Donald Trump’s trade tariffs is causing a risk aversion sentiment, driving risk assets down. On Monday, reports that Trump’s tariffs will be more moderate than previously anticipated caused turmoil in markets. According to the Washington Post, Trump is considering imposing international tariffs that are only related to sectors deemed critical to national or economic security. Trump, however, later denied these rumors, stating that the claims by the Washington Post were completely false.

The uncertainty surrounding Trump’s proposed tariffs rose even more on Wednesday after CNN reported that the incoming US President is considering declaring a national economic emergency to provide legal justification for the new tariffs. The news agency cited four unidentified sources familiar with the matter. According to the CNN article, the declaration of a national emergency would allow Trump to construct a new tariff program by using the International Economic Emergency Powers Act, known as IEEPA. Crypto markets dipped after the release of the CNN article, as Trump’s risky economic plans lowered the appeal of high-risk assets such as cryptocurrencies. 

Cryptocurrency prices are also affected by central banks’ interest rates. The US Federal Reserve cut interest rates by 25 basis points at its latest meeting to a target range of 4.25% to 4.50%.  Indications that the Fed will follow a more hawkish approach than previously anticipated are putting pressure on crypto markets. Fed Chair Jerome Powell’s stance has been more hawkish lately, emphasizing the need to be cautious about further rate cuts. In addition, the Fed’s latest dot plot indicated that only two rate cuts will take place in 2025, down from four projected in September.

Geopolitical concerns are promoting a risk aversion sentiment, lowering the appeal of high-risk assets such as cryptocurrencies. The situation between Russia and Ukraine remains critical. In addition, tensions between Israel and Lebanon have cooled after the ceasefire deal, but hostilities between Israel and Hamas continue in the Gaza area. Meanwhile, the civil war in Syria has been rekindled, further destabilizing the region and lowering risk sentiment.

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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