Why Crypto Market is Crashing? Trump’s Tariff War Wipes Out $800 Billion

The crypto market is facing a steep correction, erasing all gains since Donald Trump’s election win in November. The total market capitalization has dropped 8% to $2.7 trillion, with Bitcoin sliding 7% to $78,000—its lowest level since November. The sell-off intensified after Trump announced new tariffs on Chinese imports, raising fears of a global economic slowdown.

$800 Billion Wiped Out

According to The Kobeissi Letter, the crypto market has lost $800 billion since trade war concerns surfaced on January 20. This downturn has wiped out post-election gains, despite Trump being the most pro-crypto U.S. president in history.

Bitcoin, once seen as a hedge against uncertainty like gold, is now moving in sync with traditional risk assets. Its correlation with the S&P 500 reached 0.88 in 2024, meaning it followed stock market trends 88% of the time. At the same time, liquidity concerns are growing, with investors worried that the market could face an even deeper crash as money exits the crypto space.

Ethereum, Altcoins Take a Beating

Ethereum has also suffered heavy losses, falling 9% since November 5 and losing all its post-election gains. The Kobeissi Letter questioned whether this signals the start of a new crypto bear market. ETH is now down nearly 50% from its post-election high, trading near $2,000—its lowest level since November. This sharp decline reflects a major shift in market sentiment.

Altcoins have been hit even harder. XRP and Dogecoin dropped more than 10% after Trump’s tariff announcement, while Cardano (ADA) and Binance Coin (BNB) fell at least 9%. Traders point to money flowing out of memecoin rallies and Bitcoin ETF sell-offs as key reasons for the downturn.

One crypto user said the current market is not for altseason, we can’t recover soon.

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Market Sentiment Remains Weak

Even strong earnings from Nvidia haven’t lifted the market mood. The S&P 500’s decline and growing concerns over a prolonged U.S.-China trade war are weighing on crypto. Analysts at SignalPlus noted that bullish Bitcoin traders are backing off, with more investors turning to bearish put options as sentiment worsens.

Friday’s crypto losses mirrored a sharp decline in Chinese stocks after Trump announced a new 10% tariff. This move has heightened fears of an escalating trade war, adding more uncertainty to the market. As risk-averse sentiment spreads, crypto investors are bracing for more volatility ahead.

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