The crypto market has experienced a significant drop, with Bitcoin below $88,000 and the market capitalization of cryptocurrency falling by 8%. Key factors include macroeconomic uncertainty and new US tariffs.
Crypto Reacts to Trump's Tariffs
Bitcoin experienced a sharp fall following the confirmation by US President Donald Trump of new tariffs on imports from Canada and Mexico, and a 10% tariff on Chinese goods. Investors reacted negatively, fearing inflation and economic uncertainty, which led to a decrease in Bitcoin's value.
Correlation with Traditional Markets
Bitcoin's price movement is beginning to mirror trends in traditional financial markets. Over the past five trading days, the S&P 500 has dropped 2.3%, while the Nasdaq Composite has fallen 4%. Bitfinex's Alpha report highlighted that worsening US-China relations and restrictions on semiconductor exports, particularly Nvidia chips, are undermining investor confidence.
Collapse in Volatility
Historically, sharp price swings have characterized Bitcoin and crypto market cycles, but traders are now facing a period where momentum seems to be fading. "There was a collapse in volatility recently," Mark Cudmore noted. This could be an early signal that the next major Bitcoin collapse is imminent. Periods of low volatility often precede sharp breakouts either up or down.
Declining volatility and correlation with traditional markets introduce uncertainty into the crypto market. Investors continue to watch for macroeconomic factors that may determine the future price direction.
