The economic clash between the United States and China is impacting even the crypto market. Donald Trump's recent announcement of a national crypto reserve and China's response have caused notable market fluctuations. Is this a temporary phenomenon, or will it have a lasting impact?
Cryptos on edge after Trump’s announcement
Donald Trump surprised the financial world with his national crypto reserve project, which includes cryptocurrencies such as Bitcoin, Ethereum, XRP, Solana, and Cardano. This move marks an unprecedented shift in U.S. economic policy with the goal of strengthening the country's digital sovereignty amidst growing rivalry with China and anticipating a shift in financial flows towards cryptos. The announcement sent the markets soaring, with Bitcoin reaching $95,000 before stabilizing around $89,870. Cardano and XRP also saw significant increases. However, the euphoria was short-lived as the U.S. commercial offensive against China quickly led to a market trend reversal.
A trade war that threatens financial stability
On March 4, Washington intensified economic pressure by raising tariffs. Canadian and Mexican imports are now taxed at 25%, while Chinese products faced tax increases from 10% to 20%. Officially, these measures aim to combat fentanyl trafficking, but Beijing sees them as hostile and quickly responded by imposing a 15% tax on several American agricultural products, including wheat, corn, cotton, and chicken. China also approached the World Trade Organization, denouncing an infringement on international trade rules. These developments caused shockwaves through financial markets, leading to sharp declines in stock indices. The S&P 500 lost 3%, while the NASDAQ fell by 2.64%. Cryptos followed this trend with marked corrections, as Bitcoin dropped 8.25%, Ethereum fell 10.62%, Cardano plunged 15.9%, and Solana decreased by 14.6%.
Why are cryptos affected by this crisis?
Once perceived as an asset independent of traditional markets, Bitcoin is now heavily influenced by institutional investors. The entry of large investment funds has made the sector more sensitive to global economic fluctuations. When a crisis erupts, these players reduce their exposure to risky assets, leading to massive crypto sell-offs. However, monetary instability linked to the trade war also prompts investors to turn to traditional safe havens like gold, to the detriment of Bitcoin and altcoins. Trump's initiative also raises questions about the future of crypto market regulation, as increasing institutionalization could strengthen U.S. control at the expense of independent players.
The coming months are crucial for the crypto market. Uncertainty surrounding U.S. economic policy and the Chinese response will continue to influence trends. It remains to be seen whether cryptos will regain their status as a safe haven or remain trapped in geopolitical and economic tensions.
