Financial Bitcoin plunged 8% in the 48 hours following the policy change to a low of $93,000 before rebounding on Monday. XRP and Ethereum were hit even harder by the news, falling 33% and 22% respectively before regaining some of their losses after Trump walked back part of the policy.
The crash comes in response to a Tuesday policy deadline during which Trump’s tariffs are scheduled to take effect. The president signed executive orders imposing a 25% levy on all imported goods from Canada and Mexico. On Monday, Trump paused the implementation of tariffs on Mexico for one month after the country’s president agreed to send 10,000 troops to the border, leading cryptocurrencies to quickly rebound.
The new policy is expected to wreak havoc on global markets and increase the price of a wide variety of imported goods. Those fears pushed investors to offload digital assets to better manage the risk in their portfolios, says Zach Pandl, head of research at crypto asset manager Grayscale. “Investors, who are controlling risk, managing portfolios and controlling volatility will reduce risk in all risky assets, including crypto,” he said.
Political leaders in Canada and Mexico have already voiced their plans to retaliate against Trump’s policy with tariffs of their own, a tactic that could start a trade war and prolong the market’s downturn. “If the tariffs are in place for a longer period of time, the market implications are just getting started,” says Pandl.
While the long-term effect of tariffs would be detrimental to other financial markets, Bitcoin might benefit from the policy, according to Pandl. That’s because long-term levies could potentially reduce international trade and weaken fiat currencies over time, leading investors to put their money in crypto assets instead.
“To the extent that tariffs accelerate the fragmentation of the dollar-based global financial system, they could even increase Bitcoin adoption over the longer term,” Pandl says.
Some investors don’t expect the tariffs to last long, because they will pressure Mexico, China, and Canada to come to the negotiating table—similar to the recent situation with Colombia in which Trump imposed a 25% tariff until the country agreed to accept deportation flights. But it remains to be seen how the tariff standoff will play out. Trump was very clear on the campaign trail that they would be a hallmark of his economic policies.
Either way the market’s postelection honeymoon seems to be over. “There were a lot of positive expectations built into the markets about Trump administration policy,” says Pandl. “And maybe not a sufficient focus on some of the negatives.”
