Over the past few days, the cryptocurrency market has experienced significant volatility, with Bitcoin (BTC) and Ethereum (ETH) facing notable price declines. It has been a turbulent period for the cryptocurrency market with all coins dipping to a record 5-month low. Bitcoin’s price first dropped to approximately $77,000, slumping to $74K, marking a significant decline from its January peak of $109,225. However, we’ve seen such plunges before, namely in 2020 during the pandemic. Whether or not Bitcoin will rebound like it did five years ago, or tank even lower, is yet to be seen, considering that today we are in very different geopolitical circumstances. The sudden downturn is largely attributed to escalating trade tensions stemming from the Trump administration’s aggressive tariff policies and retaliatory measures from international trade partners, notably China.
Further, the Federal Reserve gave some inclination that it might cut interest rates in June, but there is no official confirmation yet. Still, even if this happens, will it be enough for cryptocurrencies to regain momentum, or will the coins continue to be bearish?
Besides these two, other factors might have contributed to a sharp turn of Bitcoin like whales entering the market creating panic that the sellout is on the horizon, or investors shying away from further investing in digital goods.
In any case, Bitcoin and other major coins are in for a rollercoaster ride for the next few months until the market stabilizes. For now, uncertainty and volatility are the name of the game, so let’s see how we came to this point and is there a way out.
How Tariffs Can Influence the Crypto Market?
On April 7th, tariffs imposed by the US against the whole world went into effect. The market reacted, and the majority of stocks and cryptocurrencies crashed wiping away $250 billion in a few hours. Almost every industry was affected, from retail to hospitality, crypto casinos, and car makers. All aspects of our lives are about to be impacted by the tariffs, and the subsequent crisis that will probably ensue from the decline of over 15% in one day.
And it’s not only digital coins that are hit by the changes in the global markets. Additionally, U.S. cryptocurrency-related stocks also experienced declines following the announcement of new tariffs. Coinbase (COIN) fell by 8.96%, MicroStrategy (MSTR) dropped by 8.6%, and Bitfarms declined by approximately 6.3%.
This is actually the second time the US has imposed tariffs. Back in 2016, the president announced that higher taxes would be in place for all imported goods, especially targeting China and Southeast Asia. However, at that time, the crypto market was mostly unaffected by the new tariff policy. The impact during that period was minimal due to two main factors: first, the tariffs were less severe; second, the crypto market was primarily driven by its internal catalysts, such as halving events and emerging digital coins.
Looking at the long-term prospect, tariffs might be good for some and devastating for others. While they may trigger sharp declines in cryptocurrency prices and blockchain-related stocks, they can also result in positive outcomes under certain conditions. For now, everything is a matter of speculation, while the coins continue to slip to new lows. One thing is for certain though – the implications of the tariffs policy are about to change global trade and reshape industries across the globe. Smaller companies that don’t have a lot of wiggle room when it comes to finances are already suffering crippling losses. Keep in mind that we are only two days post-tariffs. Large enterprises in lucrative businesses are yet to feel the impact since they stockpiled the materials before the news became official. However, some companies that operate in the digital world, like online casinos focusing on table games and megaways slots, will have to find a way for their players to not lose large sums due to the failing market of the cryptos. Many online platforms focused on developing blockchain technologies since they provide better security and efficiency when it comes to payments and personal data, only to find the whole project in jeopardy after the recent dive of Bitcoin. Big names in the gaming industry like Stake.com manage to absorb the impact of the new policy that shook up the markets. However, no one can be certain what the future holds and whether or not cryptos will be able to bounce back since the tariffs can have a range of effects on the crypto market.
Mining Costs
With the trade war in full swing, the cost of importing technology products and services rises. The equipment needed for mining digital coins will be especially under attack since the tariffs specifically targeted the industry of microchips and semiconductors. Taiwan is still very much part of China, according to their government, so the tariffs will be applied to the products coming from this country with an added 108% of the cost. Smaller operations will be extensively hit with this or may be driven out of the business completely. Such changes could weaken Bitcoin’s network security and reduce the overall hash rate. As a natural and logical consequence of such a radical move, the price of digital coins will continue to drop until the market is able to gain some footing and hopefully rebound.
Regulatory Changes
While the US government is hoping to boost the domestic economy with the imposed taxes, others are looking for ways to get even. Trump’s trade policies may provoke retaliation from other countries, potentially leading to shifts in regulatory policies in every industry, including the crypto markets. Governments under economic pressure may implement tighter controls over cryptocurrencies leading to less use of the digital coins and driving the prices to the ground. Whatever they decide, it’s going to be a lose-lose situation for small businesses and investors who are already scrambling to find a way to bypass the debilitating taxes.
Around the world, small and medium companies, and investors are already feeling the sting of the tariffs. Their customers, if there are any left, are doomed to pay higher prices for the same products and services leaving the business owners and investors to either close the doors or get liquidated or find a different clientele. Both scenarios are going to affect them greatly, especially after years or decades of building businesses from the ground up.
Capital Flow
Tariffs could reduce global economic activity and liquidity. Up until a couple of days ago, customers enjoyed low prices and quality products. Today, they can still purchase the same products or services but for 50-100% more. Surely, this will cripple the economies. Due to the speculation, volatility and uncertainty, the demand for digital goods will definitely decline, dragging down the prices of cryptocurrencies. So, predicting whether Bitcoin hit the bottom yet, or is still riding on a runaway train, is impossible. Even though speculators are in a panic-driven mode, predicting prices as low as $10K for a BTC, the truth is no one can be sure.
Federal Reserve
Higher tariffs typically lead to increased costs for imported goods and inflation. This might provoke the Federal Reserve to cut the interest rates at the end of the quarter in June of this year. Some predict that they might not wait that long and will react aggressively way sooner in order to increase liquidity. Increased liquidity from rate cuts could, in turn, support higher cryptocurrency prices. In the past, this was always the case, with everyone anxiously waiting for the press conference of the chairman of the Federal Reserve where he would announce the rate cuts. Sometimes, the impact was negligible, while in other cases it drove the prices of the crypto up prompting the start of the bull market trend.
The American president is in office for only three months, and tariffs might be subject to change. He may further increase, reduce, or even eliminate tariffs, creating continued uncertainty which could potentially cause another dip. Regardless of the direction, the crypto market is likely to respond, especially as it becomes increasingly intertwined with traditional finance systems. This will create distress and concern among investors, mostly small ones that do not handle large sums on a daily basis or are able to HODL.
Diversify
In times of uncertainty, the only way to counteract is to diversify your portfolio. During the high volatility, investors are trying to neutralize the risk by buying many different stocks or coins. By dispersing capital across multiple crypto assets, including stablecoins, rather than concentrating on a single asset, investors are minimizing the risk of losing everything to one dip.
Experienced investors buy assets across the board, not only cryptocurrencies. All trading markets took a plunge, and every industry was affected. This is why they tend to allocate their funds in different markets, buying various stocks.
Improve Risk Management
Risk management is the most important skill a trader should have before investing in any asset. In unpredictable markets during turbulent times like today, risk management can mean the difference between saving your assets and going bankrupt. Tools like stop-loss and take-profit orders can help limit potential losses and protect gains. These should always be preset, even when the markets are not exhibiting frequent changes.
For a day trader, or if you’re scalping, this might not be so crucial. However, if you’re trading long-term, setting the maximum loss that you’re willing to risk is vital. In many cases you will not have enough time to react, since markets can take sharp turns making it impossible to absorb the impact. Setting take profit prevents you from getting greedy. The usual odds are 1:2, meaning that you set the profit at twice the investment. If you’re a newcomer to trading, this is fundamental before you even dip your toes into the markets. If you can’t immediately figure it out, try paper trading for the time being. This will help you build self confidence and gain some insights into how the markets move.
Monitor the Market
Investors should stay informed on U.S. economic developments, policy announcements, and market reports. Staying in the loop with the tariffs will give you the time to react promptly. The markets are like living, breathing beings, and the only thing that’s constant is change. Further, pay attention to investors’ sentiment and speculators. They can sometimes sway the prices, driving the markets to the extremes. There is nothing backing up digital coins but the current sentiment and guesswork. Still, keep track of the latest news since they can be good indicators of upcoming events.
Consider Long-Term Investment
Even though day trading seems to be a lucrative business, it’s way wiser to invest long term. If investors have conviction in a particular cryptocurrency, such as Bitcoin (BTC), a long-term holding strategy may yield better results absorbing the minor losses along the way. Historically, while crypto assets can be volatile, they have shown an upward trajectory over time. Five years ago, Bitcoin was selling for around $5,000, while today the value fluctuates between $70,000 and $80,000. That is fifteen to sixteen times more. Imagine if you invested $10,000, today you will have $140K minimum. So, you see how long-term investments are less risky and more profitable.
The internet is overfilled with people selling their magic strategies on how to become a millionaire in a couple of months. Surely, this happened to someone at some point. But if you’re not one in a hundred million people to be that lucky, stay away from scalping, day trading, options and futures. Invest, diversify and stick to your strategy of holding the currency at least for a few years. Don’t panic trade selling the coins at the first sign of a dive, your diversified portfolio will take care of itself.
At the moment, the world is trying to grasp the consequences of the tariffs. To navigate these uncertain markets, it is important to remain flexible, conduct thorough research, and consider long-term investment strategies.
Also Read: How Banks and Businesses Store Bitcoin And Other Cryptocurrencies in 2025
