The total cryptocurrency market capitalization shed as much as 4% on Thursday, dropping to $2.9 trillion as President Donald Trump issued 25% tariffs on foreign automobiles in the latest trade war maneuver from the U.S. administration.
Trump’s overnight tariff escalation increased tensions with foreign economies, ahead of the April 2 "Liberation Day" announcement. The president is expected to impose reciprocal tariffs on trade partners next week; however, he has hinted that duties may be more lenient and less reciprocal, according to CNBC.
"Any further retaliation from these target economies risks injecting a fresh wave of uncertainty into an already volatile global trade landscape," QCP Capital analysts wrote in a note.
"The market is highly sensitive to macro developments, and any significant shifts in trade policy could further impact risk assets, including crypto," Ryan Chow, co-founder and CEO Solv Protocol, added in a note shared with The Block.
Markets had seemingly digested some of the new tariff-fueled shock by publishing time. The S&P 500, NYSE Composite, Nasdaq Composite, Dow Jones and Russell 2000 index all flipped green in recovery a few hours into U.S. trading time.
Bitcoin — which previously fell close to the $85,000 level during Asian hours — recovered to above $87,000 at publication time, according to The Block's price page.
A basket of other digital assets gained while some crypto majors like ether, XRP, and SOL floated in losses, showing signs of a scattered market price action. The GMCI 30 Index, which tracks the top 30 cryptocurrencies by market cap, posted a faint decline.
Fourth-quarter U.S. GDP data came in slightly better than expected, moderately uplifting markets after the initial decline. The U.S. Bureau of Economic Analysis (BEA) and the Department of Labor reported an upward revision of 2.4% for the fourth quarter GDP, higher than the previous 2.3% figure, which signaled modest growth.
However, growth in the final quarter of 2024 still lagged behind the 2.8% noted in the prior year's period. Also, initial jobless claims data for the week ending on March 22 came in at 224,000, lower than the experts’ 225,000 forecast, yet higher than the previous 223,000 and 218,000 seen late last year. The data suggested cooling demand, meaning stagflation concerns, may persist into the second quarter.
More macro data is expected this week, with the Federal Reserve’s preferred inflation gauge — the Core Personal Consumer Price Index — scheduled for release on Friday. Predictions foresee a 2.7% PCE year-on-year figure, which could form another slight increase like the GDP data.
Sid Powell, co-founder and CEO of Maple Finance, said such data would make for "a steady but unspectacular combo."
"[I]f both come in hot, Bitcoin could take a hit as the Fed digs in on rates; if they undershoot, recession concerns might lift it as a hedge," said Powell. "Crypto's next move hinges on how these numbers alter the Fed’s narrative."
The Fed adopted a wait-and-see stance while Trump’s trade war engulfed traditional markets and risk assets. An unclear policy direction has effectively dampened the chances of a bullish second quarter aligning with historical patterns, both Chow and Maple's Powell opined.
"Q2's usual Bitcoin bullishness feels tough to see playing out, overshadowed by Trump’s trade wars and a Fed wrestling stagflation risks. The market’s likely stuck in a choppy $80K-$95K range, riding rate cut hopes or macro jitters. Investors should brace for volatility," the Maple CEO said.
"Market favors certainty, regardless of direction," said Chow. "The current landscape, i.e., uncertainty around Fed policy and Trump’s tariff policy, creates a challenging environment for risk assets. Once these macro uncertainties start to clear, the market will likely gain stronger conviction and direction on where this is gonna go."
Powell also theorized that Bitcoin and crypto could eventually overcome macro sensitivity, though he stressed that "macro's calling the shots" for now.
"Trump's tariff fixation is crypto’s short-term nightmare, though it could eventually weaken the dollar and spark a BTC resurgence," Powell continued. "Miners are unloading at a record pace while ETFs mop up supply, leaving sentiment torn—altcoins may run hot if conditions shift as they have been steeply sold off."
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