• Bitcoin fell 7% to $93,768.66 as markets reacted to President Trump’s new tariffs on Canada, Mexico, and China, triggering broader crypto sell-offs.
  • Analysts suggest tariffs could weaken the U.S. dollar in the long term, potentially driving Bitcoin higher despite short-term market volatility.

Bitcoin and the broader cryptocurrency market experienced sharp declines over the weekend following the announcement of new U.S. tariffs by President Donald Trump.

Bitcoin fell 7% below $94K, while the CoinDesk 20 index, which tracks the largest cryptocurrencies by market capitalization, recorded a 19% drop. Ether saw a steeper decline, plunging 20% to its lowest level since November.

On Saturday, President Trump unveiled a set of tariffs targeting key U.S. trading partners. Imports from Canada and Mexico will face a 25% tariff, while Chinese goods will be hit with a 10% tariff, effective Tuesday. These three nations account for approximately $1.6 trillion in annual U.S. trade.

In response, Canada and Mexico vowed to impose retaliatory tariffs, while China stated its intention to challenge the measures at the World Trade Organization. Investors fear the trade conflict could further strain economic growth, impact corporate earnings, and contribute to inflation.

“Crypto is really the only way to express risk over the weekend, and on news like this, crypto resorts to a risk proxy,” said Chris Weston, head of research at Pepperstone, in an interview with CNBC.

Bitcoin had previously reached a record high of $109K, coinciding with Trump's inauguration as the 47th U.S. president. The cryptocurrency had surged 40% since the November election, driven by expectations of a pro-crypto stance from the administration.

Jeff Park, head of alpha strategies at BitWise, argues that the tariffs could ultimately drive Bitcoin’s price higher in the long term. He suggests that weakening the U.S. dollar is a key objective of the tariff policy, as a lower dollar value could correct trade imbalances and make U.S. exports more competitive. Park likened the situation to the 1985 Plaza Accord, when major economies collaborated to weaken the dollar.

Park also warned that the tariffs could contribute to inflation, disproportionately affecting U.S. trading partners and prompting a global search for alternative stores of value, such as Bitcoin.

Despite the long-term bullish outlook suggested by some analysts, the immediate reaction in crypto markets was negative. Bitcoin dropped 7.2% over the past week, while major altcoins saw even sharper losses. Ether, Solana, and XRP declined by 11.6%, 19.3%, and 16.6%, respectively, according to CoinMarketCap data.

Meanwhile, the U.S. Dollar Currency Index (DXY), which measures the dollar’s strength against other fiat currencies, has been climbing since October 2024. While the dollar’s strength briefly pulled back in January, it regained ground in early February.

A strong dollar and rising U.S. Treasury yields may continue to pressure Bitcoin and other risk-on assets in the near term, as investors shift focus to more stable options like government securities.

Edited by Harshajit Sarmah