Bitcoin Falls Below $95,000 After Trump Starts Trade War
Bitcoin suffered a nosedive after President Donald Trump announced 25% tariffs on Canada and Mexico and an additional 10% import taxes on China.
Following President Trump's execution of his threat to implement tariffs of 25% on Canada and Mexico and 10% on Chinese goods commencing Tuesday, which provoked retaliatory pledges from these nations, investors preferred the US dollar, elevating it to stronger levels while shunning risk assets.
On Monday, financial markets were compelled to confront the truth following weeks of anticipating a US-led trade conflict, with tit-for-tat trade retaliations threatening global trade and companies.
Since Trump's election, the dollar has gained solely from discussing tariffs. The dollar increased around 1% last week, marking its most robust gain since mid-November.
On Friday, automakers and companies associated with China were the primary contributors to the drop in US markets.
Bond traders confront the challenging decision of focusing on inflation concerns or heightened market risk, with bets starting to show the Fed will be on an extended pause.
The crypto market is finally learning about 'Trump Speak' and his policies.
While he has embraced the industry, his other policies are weighing on the other boosts to the sector.
With two weeks into Trump in the office, the chasm between Bitcoin maximalists and the rest of the crypto community has been widened once again.
Bitcoin crashed below the $95,000 mark, down over 6% through the weekend from above $105,000 on Saturday.
Tariffs are expected to be inflationary and keep US interest rates high. They will also have a greater negative impact on foreign economies than the US, making the dollar more attractive as a safe haven.
This is the basis for the positive dollar posture. When the demand for expensive goods from the United States decreases, the value of foreign currencies falls.
Risk Asset Whiplash
Sectors that are seen as potential battlegrounds in a trade war have traders on high alert for large stock market fluctuations.
Concerns that tariffs would increase inflation and hurt bottom lines caused a UBS Group AG basket of vulnerable equities to fall nearly 4% on Friday.
Although Trump claimed last week that he was unfazed about how markets would react to his trade proposals, cryptocurrency investors saw this as a warning.
Treasury Yields Drop to 2025 Lows
At the beginning of the year, despite inflation data that was lower than expected, Treasuries gained a little.
However, investors in fixed-income securities will now face the challenge of weighing the increased market risk against the inflationary effects of tariffs and Trump's propensity to limit immigration while easing fiscal policy.
In the days ahead, the fixed-income and the crypto markets will face further challenges.
Following the recent pause in the Fed's easing cycle, which indicated an extended but hawkish hold, future expectations will be influenced by data on inflation and employment.
For now, Trump's policies clearly point to inflationary troubles ahead.
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