This weekend, the cryptocurrency market went through a very bad patch. After reaching the key threshold of $100,000, the price of Bitcoin suddenly contracted to around $92,000.
The Bitcoin king obviously pulled down altcoins, triggering a wave of liquidations across the market. In the space of a weekend, investors lost more than two billion dollars, the CoinGlass platform shows.
Cryptos like Ether, XRP, Solana and memecoins, such as Dogecoin, suffered greatly. The valuation of the crypto market, which was above $3.7 trillion last Friday, collapsed by more than 10%, falling below $3.2 trillion.
The Donald Trump effect weighs down Bitcoin
In fact, the crypto market followed the movement of traditional financial markets. When the markets opened, all values were in the red on Monday, February 3, 2025. The main stock indices were down across the world. As Wintermute CEO Evgeny Gaevoy points out, “our little crypto market is now tightly connected to the real world outside.”
The origins of this flash crash lie in a controversial decision by Donald Trump. Back in the Oval Office, the Republican took a series of strong measures aimed at getting the American economy back on track. The president decided to impose customs duties on products imported from Canada and Mexico to the United States. As always, Donald Trump is relying on a protectionist policy that aims to favor American companies to the detriment of their foreign competitors.
This 25% tax is likely to cause a rise in prices and disrupt the economy. In response, Canada announced similar duties on American products sold on the Canadian market. The same story from Mexico.
In addition, the Trump administration has decreed 10% additional taxes on China. The specter of a new trade war has blown a wind of panic among investors, who fear an escalation of economic sanctions between countries. This is why the markets have plummeted, including the crypto market.
Ironically, it was under the impetus of Donald Trump's victory that Bitcoin had propelled itself above $100,000. This time, the "Trump effect" has been rather harmful to the ecosystem that the president is courting and trying to rally to his cause.
In short, investors are selling off en masse the riskiest assets in their portfolios in anticipation of a market collapse. They are instead turning to resilient assets, such as safe havens. This is why gold recorded a sharp rise over the weekend. Financial markets always react in this way in the event of geopolitical tensions.
Economist Alex Krüger agrees and points out that "bitcoin is above all a risk asset", and that Trump's customs duties are "harmful for risk assets".
Rebound and rebound of cryptos
Two days after his administration's announcements, Donald Trump agreed to negotiate with Mexico and Canada. The real estate magnate thus committed to suspending new customs duties on Canadian and Mexican products. The president spoke by phone with his counterparts in order to find common ground.
The suspension announced by Donald Trump quickly resulted in a rebound in the cryptocurrency market. In a few hours, Bitcoin rose above $100,000, erasing the net losses of the weekend.
In parallel with these reversals related to customs duties, Donald Trump continued to lay the foundations of his policy on cryptocurrencies. The Republican plans to discuss his strategy with David Sacks, the White House crypto advisor, at a conference organized this Tuesday evening. The American president is expected to discuss the opening of a national strategic reserve of cryptocurrencies. He has just signed an executive order to this effect, which has also contributed to the surge in cryptocurrencies.
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