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February 4, 2025

Bitcoin Faces Sharp Decline Amidst Market Turmoil from Trump’s Tariffs

Bitcoin and major cryptocurrencies dropped sharply as renewed trade tensions stemming from President Donald Trump’s tariffs ignited a risk-off sentiment across global markets.

Bitcoin’s Response to Economic Instability

The largest cryptocurrency fell nearly 4% to $96,038.0 at 04:32 ET. This drop highlights a shift as investors reassess risk assets following the imposition of tariffs on Canadian, Mexican, and Chinese imports.

Despite Bitcoin’s perceived role as an inflation hedge, current macroeconomic developments have complicated its short-term outlook.

Impact of Tariffs on Cryptocurrency Market

According to Bernstein analysts, the tariffs have bolstered the U.S. dollar and elevated inflation expectations, making imminent interest rate cuts from the Federal Reserve less likely. This change has tightened global liquidity, affecting all risk assets, including cryptos.

Analysts noted that Bitcoin’s correlation with risk assets remains strong, particularly during turbulent periods in the market.

Long-Term Outlook for Bitcoin

Even with the market turmoil, analysts maintain that Bitcoin’s long-term fundamentals are promising. Concerns regarding monetary debasement continue to drive institutional interest despite the recent fluctuations.

Bitcoin has consistently shown robustness around the $90K range, suggesting sustained demand. Furthermore, January’s net inflow into spot Bitcoin ETFs totaled $5.3 billion, indicating notable institutional adoption.

The Future of Bitcoin in a Volatile Market

Investors will monitor macroeconomic conditions, Federal Reserve policies, and institutional investment trends to evaluate Bitcoin’s trajectory. While the crypto market vacillates, underlying fundamentals attract both institutional and retail investors alike.

Get real-time data on the cryptocurrency market and insights from the Crypto Currency Free API.

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