The crypto market is experiencing a major sell-off, wiping out more than $400 billion in just 24 hours. Major cryptocurrencies like Bitcoin, Ethereum, XRP, and Dogecoin have suffered significant losses. What caused this sudden downturn?
How Trump's Tariff War Impacts the Market
One of the main reasons for the market drop is the recent trade wars sparked by former U.S. President Donald Trump. By declaring a national emergency under the 1977 International Emergency Economic Powers Act (IEEPA), Trump imposed strict tariff regulations: 25% on imports from Mexico and Canada and 10% on Chinese goods. The market reacted immediately, fearing higher prices, rising inflation, and economic instability. As a result, U.S. stock indexes plummeted, dragging the crypto market down with them.
Bitcoin Network Activity Slows Down
Aside from external economic factors, Bitcoin's network activity has seen a significant decline. Data from CryptoQuant shows that the mempool is nearly empty, indicating fewer transactions are taking place — an unusual occurrence for Bitcoin. Additionally, Bitcoin transaction fees have dropped to just 1 sat/vB, signaling low demand for block space. This is the lowest level of activity recorded since March 2024.
Impact of the Dollar's Rise on the Crypto Market
Another factor weighing down Bitcoin is the strengthening U.S. dollar. The U.S. Dollar Index (DXY) has surged to 108.50, while the 10-year Treasury yield has risen above 4.54%. Historically, Bitcoin moves in the opposite direction of the dollar and Treasury yields, meaning a stronger dollar often leads to lower BTC prices.
Despite significant losses, if Bitcoin manages to recover and break above $95,000, it could regain its bullish momentum. However, if it falls below $90,000, analysts warn that further declines could be on the horizon.
