Mainstream cryptocurrency prices tumbled on Friday, with Bitcoin dropping 6.69% and Dogecoin falling by 9.74%, as escalating trade tensions and economic uncertainty weighed heavily on digital assets.
The downturn came after US President Donald Trump reaffirmed plans to impose new tariffs on major trading partners, including Mexico, Canada, and China. Writing on his social media platform, Trump confirmed that the tariffs—set at 10% for Chinese imports and various rates for other nations—would take effect on March 4. These measures, combined with existing trade barriers, mean that nearly all of the United States’ trading partners, except for the United Kingdom, will face additional economic pressure.
The move triggered widespread caution among investors, leading to sharp declines across global financial markets. Asian and US stock indices suffered substantial losses, with cryptocurrency markets mirroring the broader sell-off. As risk-sensitive assets, digital currencies were particularly vulnerable to the shift in investor sentiment.
Economic and Monetary Policy Weigh on Crypto
Beyond trade tensions, concerns over global liquidity and monetary policy have added to the volatility in crypto markets. The US Federal Reserve has maintained its benchmark interest rate at 4.25% to 4.5%, pausing anticipated rate cuts amid persistent inflationary pressures. The prospect of prolonged higher interest rates has dampened enthusiasm for speculative assets, including cryptocurrencies.
On February 27, the Federal Reserve Bank of Cleveland’s president signaled that current interest rate levels had not yet reached a significantly restrictive point, suggesting that policy could remain tight for an extended period. This stance has further reduced expectations of a near-term rate cut, leading to cautious sentiment in financial markets.
Uncertainty Over Cryptocurrency’s Future in US Policy
Despite growing support for cryptocurrencies within Trump’s administration, Federal Reserve Chair Jerome Powell has dismissed the possibility of integrating digital assets into the country’s reserve holdings during his tenure. Security vulnerabilities have also continued to plague the sector, with frequent hacking incidents underscoring ongoing risks in technology and asset management.
Additionally, the rise of artificial intelligence has contributed to a reassessment of leading US technology stocks, further influencing cryptocurrency valuations. The emergence of cost-effective and highly efficient AI firms, particularly from China, has intensified competition and accelerated market revaluations.
Market Volatility Expected to Persist
As Trump’s administration continues to shape economic and foreign policy, market observers anticipate sustained volatility in the cryptocurrency sector. While many within the government advocate for greater acceptance of digital assets, the unpredictability of policy decisions and broader macroeconomic conditions could lead to further fluctuations.
For crypto investors, this period of heightened uncertainty underscores the delicate balance between regulatory developments, global trade policies, and evolving technological trends. As the landscape continues to shift, market participants will be closely watching for further signals from policymakers and central banks.
