Bitcoin baffles crypto investors with its erratic price swings: one day, it shines at its peaks, next day, it suddenly plummets. Once again, the market has witnessed another crash of the flagship cryptocurrency following US President Donald Trump’s announcement of trade wars with Canada, Mexico, and China. No wonder, market participants are unnerved.
After all, Trump has fulfilled his election pledge. The introduction of trade tariffs on the well-established trade partners of the US had a ripple effect on global financial markets. Interestingly, the trade war caught analysts and investors off-guard as they did not believe it would happen in reality. The crypto market also plunged in response.
The number one crypto sank to a low of $91,440, marking its lowest level in three weeks. At the time of writing, BTC has rebounded to $95,200, still down 4.7%. Ethereum, the second-largest cryptocurrency, saw an instant collapse of 27%.
Bloomberg estimated that the total crypto market capitalization shrank by more than $350 billion on February 3.
25% tariffs on goods from Canada and Mexico and 10% tariffs on China took effect on February 4. Trump stated that such measures were taken in response to drug trafficking, the migration crisis, and the US trade deficit. Leaders of the affected countries are seeking a compromise in the escalating trade war. However, Mexico, Canada, and China are prepared to retaliate if no resolution is found.
Canada’s response was particularly strong, as Trump had previously suggested it become the 51st state of the US. In retaliation, Canada imposed 25% tariffs on US beer, wine, bourbon, fruits, juices, clothing, sports equipment, and household appliances.
