Is it true that the Crypto Market Will Rebound After Trump stops Tariff Policies in Mexico and Canada?

Bittime - The cryptocurrency market has recently experienced significant fluctuations, driven primarily by geopolitical events, particularly the US government's decision to impose tariffs on imports from Canada, Mexico and China. 

This announcement led to a rapid and sharp decline in the value of cryptocurrencies, highlighting the interconnectedness of global policy and the fragility of digital assets.

Impact of Tariffs on Cryptocurrency Prices

After former President Donald Trump's announcement of high tariffs, the cryptocurrency market experienced a dramatic decline. Bitcoin price fell from almost $105,000 to around $92,000, while Ethereum fell to approx $2,451. 

Memecoin Had Dropped

Other cryptocurrencies, including Dogecoin and various meme coins associated with Trump, suffered substantial losses, with some seeing declines of more than 75% from previous peaks. 

Garrick Hileman, a crypto analyst, noted that while the decline in meme coins is worrying due to their speculative nature, Bitcoin's resilience during this market crash is noteworthy. This volatility highlights the risks inherent in the digital asset space, especially when impacted by geopolitical uncertainty.

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Markets Recover After Mexico & Canada Tariff Suspension

However, the initial pessimism did not last long. After negotiations between the US and Mexico, President Claudia Sheinbaum announced a temporary suspension of tariffs for one month. The deal includes the deployment of 10,000 Mexican troops to strengthen border security against illegal drugs and undocumented immigration. 

Likewise, Canadian Prime Minister Justin Trudeau engaged in discussions that resulted in a 30-day suspension of tariffs and proposed a $1.3 billion border security upgrade plan.

Bitcoin and Ethereum Price Increase After Announcement

This development prompted a rapid recovery in the cryptocurrency market. Bitcoin regaining a foothold, breaking through the numbers $100,000 again and reached the peak of approx $101,731. Ethereum also recovered to approx $2,880 after the previous decline. Other tokens and altcoins followed suit with substantial gains.

An Analyst's Perspective on Market Dynamics

Despite the recovery, analysts at Bernstein warn that holding crypto assets remains risky in the short term due to their correlation with risk assets and potential inflationary pressures from tariffs that could increase the cost of living and strengthen the dollar. 

Bitcoin's long-term value is seen as a hedge against currency devaluation triggered by inflation and rising national debt.

Wider Economic Implications of Tariffs

The proposed tariffs have broader implications for US consumers who may face price increases on goods ranging from food to vehicles due to supply chain disruptions. Economists argue that the burden of tariffs often falls on American consumers rather than foreign producers. 

Hakeem Jeffries, a Democratic leader in the House, criticized the tariffs as detrimental to everyday people by increasing the cost of essential goods.

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Conclusion: The Closeness of the Crypto Market to the Global Economy

Recent events illustrate how closely the cryptocurrency market is connected to global economic policy. The rapid change in market sentiment following the tariff announcement highlighted both the volatility of digital assets and their sensitivity to geopolitical developments. Investors are advised to remain cautious and informed about these dynamics as they navigate this unpredictable landscape.

FAQ

1. What caused the recent decline in cryptocurrency prices?

The recent drop in cryptocurrency prices was caused by the US government's announcement of high tariffs on imports from Canada, Mexico, and China. This decision created uncertainty in the market, resulting in a decline in the value of digital assets.

2. How did the cryptocurrency market recover after the tariff announcement?

The cryptocurrency market is starting to recover following negotiations between the US and Mexico as well as Canada, which resulted in a temporary suspension of tariffs. This deal increased investor confidence, pushing Bitcoin and Ethereum prices back up.

3. What risks are cryptocurrency investors facing today?

Cryptocurrency investors face high risks due to market volatility triggered by geopolitical factors and inflation. Analysts warn that crypto assets remain risky in the short term, although Bitcoin is considered a hedge against currency devaluation in the long term.

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Reference

CryptoNinjas, Crypto Market Rebounds as Trump Pauses Tariffs on Canada and Mexico, Accessed February 4, 2025

Author: IN