Trump's US reciprocal tariffs pause fails to improve Bitcoin and crypto market outlook
- President Donald Trump signed a memo ordering his administration to draw up a plan for reciprocal tariffs, pausing its proposed start this week.
- Bitcoin and top cryptos halted their declines following the news, indicating rising correlation between the crypto market and macroeconomics factors.
- With the tariffs likely beginning in Q2, market participants may be unwilling to deploy capital into the crypto market freely.
Bitcoin (BTC) and top cryptos halted their declines following a pause in President Donald Trump's reciprocal tariff plans, which were originally scheduled to go live on Thursday. The tariffs will begin in April and could negatively impact investor sentiment going into Q2.
Bitcoin and crypto market sees brief recovery as Trump pauses US reciprocal tariffs
President Donald Trump signed a memo on Thursday, calling on his administration to devise "the equivalent of a reciprocal tariff with respect to each foreign trading partner."
The order tasks Secretary of Commerce Howard Lutnick and other economic officials in the administration to carve out plans for reciprocal tariffs on countries imposing taxes on US imports.
"On trade, I have decided for purposes of fairness, that I will charge a reciprocal tariff, meaning whatever countries charge the United States of America, we will charge them," Trump told reporters in the Oval Office.
The levies were previously alleged to kick off this week, following President Trump's first mention of the reciprocal tariffs last week.
Following the latest signing at the Oval Office, Howard Lutnick told reporters the tariffs will likely start in April.
Bitcoin and the crypto market breathed a sigh of relief following the pause in Trump's reciprocal tariff plans.
Bitcoin earlier saw a decline during the Asian session, diving to $95,000 from over $98,000 as the market anticipated the tariffs to kick off on Thursday. However, with the pause, Bitcoin halted its decline, reclaiming the $96,000 level.
Nevertheless, with the tariffs likely to begin in Q2, investors may be unwilling to deploy capital into the crypto market freely.
This is evident in Bitcoin ETFs' flows, which have been negative every day since the beginning of the week. The products have recorded a cumulative four-day net outflow of nearly $680 million, per Farside data. This underscores Bitcoin and the crypto market's rising correlation with macroeconomic factors.
The crypto market has largely suffered from bearish macroeconomic factors in the past few weeks, with the major highlight coming between February 2 - 3, when a quick crash wiped over $2 billion from the crypto derivatives market.
With macroeconomic conditions still signaling uncertainty, Bitcoin and the crypto market will likely continue consolidating in the next few weeks, unless a major catalyst alters investors' sentiment.
Bitcoin, altcoins, stablecoins FAQs
Bitcoin is the largest cryptocurrency by market capitalization, a virtual currency designed to serve as money. This form of payment cannot be controlled by any one person, group, or entity, which eliminates the need for third-party participation during financial transactions.
Altcoins are any cryptocurrency apart from Bitcoin, but some also regard Ethereum as a non-altcoin because it is from these two cryptocurrencies that forking happens. If this is true, then Litecoin is the first altcoin, forked from the Bitcoin protocol and, therefore, an “improved” version of it.
Stablecoins are cryptocurrencies designed to have a stable price, with their value backed by a reserve of the asset it represents. To achieve this, the value of any one stablecoin is pegged to a commodity or financial instrument, such as the US Dollar (USD), with its supply regulated by an algorithm or demand. The main goal of stablecoins is to provide an on/off-ramp for investors willing to trade and invest in cryptocurrencies. Stablecoins also allow investors to store value since cryptocurrencies, in general, are subject to volatility.
Bitcoin dominance is the ratio of Bitcoin's market capitalization to the total market capitalization of all cryptocurrencies combined. It provides a clear picture of Bitcoin’s interest among investors. A high BTC dominance typically happens before and during a bull run, in which investors resort to investing in relatively stable and high market capitalization cryptocurrency like Bitcoin. A drop in BTC dominance usually means that investors are moving their capital and/or profits to altcoins in a quest for higher returns, which usually triggers an explosion of altcoin rallies.
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