Liberation Day or Liquidation Day? Trump's Tariffs Cause Sell-off and Cryptocurrency Panic

The "national emergency" declared by U.S. President Donald Trump on April 2, 2025, has led to significant chaos in the market, especially in the crypto market. The new tariffs imposed on many countries have resulted in a bloodbath in the crypto market. The economy, already fragile due to the trade war, has been pushed into a deeper recession with the new tariffs imposed. Bitcoin (BTC), for the first time, literally reached and then lost 20% of its peak price. Ether (ETH) also followed the trend and plunged along with the global stock market. Trump's speech on the issue of tariffs and the crypto market downturn In a speech at the Rose Garden, President Trump announced that a national emergency would be declared and a 10 percent tax would be imposed on all countries starting from April 5, 2025. Countries like China will face an even harsher tax of 34 percent, while the European Union will be subject to a 20 percent tax. Finally, Japan will face a 24 percent tax. Upon hearing these announcements, traders clung to the fragile hope that cryptocurrency prices would rise even higher, but once the details of the tariffs were revealed, the market plummeted uncontrollably. Bitcoin, reaching an astonishing high of $88,500 during the session, plummeted uncontrollably, dropping 2.6 percent to around $82,876. Ethereum (ETH) also faced a similar fate, dropping more than 6 percent from $1,934 to $1,797. At the same time, the entire crypto market also felt the burn, experiencing a 5.3 percent decrease in total market capitalization, bringing it down to $2.7 trillion. The Crypto Fear & Greed Index shows extreme fear. After the announcement, the Crypto Fear & Greed Index, which tracks market sentiment, shows a score of 25, falling into the "extreme fear" category. The inertia response to the announced tariffs and the persistent worries about the international trade situation drive this sentiment. Crypto market analyst Rachael Lucas stated, "On BTC Markets, trading volume surged by 46% as local traders quickly adjusted their positions." This reinforces the notion that increased fear leads to surrender. These strong moves clearly define the instability of the crypto market, leading to strong buying and selling based on sentiment. Despite recovering 0.8% to $83,205, Bitcoin still lacks much momentum. Ether rose 1.2% to $1,810, but overall, the pessimistic sentiment still prevails. New tariffs and their global economic impact The consequences of Trump's tariffs extend beyond the crypto market and now include the global stock market. For example, the S&P 500 index has lost over 2 trillion dollars in market capitalization, or about 125 billion dollars every minute. According to The Kobeissi Letter, this reflects the overall panic in the trade market related to the new policies. David Hernandez, an investment expert in the crypto market at 21Shares, pointed out that, "Although the tariff level is slightly higher than expected in the announcement, it at least shows that policymakers are very clear and assertive about what will be done." Hernandez believes that although there will be some volatility in the medium term due to this announcement, in the long run, the crypto market will appreciate certainty and clarity. Long-term outlook: The market thrives thanks to certainty Although tariffs have caused some fluctuations in the crypto market in the short term, Hernandez remains cautiously optimistic. David Hernandez emphasized that "the market is developing thanks to certainty", adding that speculation has largely been eliminated, allowing institutional investors to take advantage of "compressed valuations". As highlighted, global reactions will be of paramount importance in the future. Hernandez notes that "The markets will closely monitor the responses from China and the European Union and other major economies." If these parties react strongly, the panic sell-off may become more pronounced. On the other hand, if countries respond calmly, the market will have a chance to stabilize and begin to recover. Conclusion on Trump's tariffs: What does this mean for cryptocurrency investors? Trump's crypto tariffs have caused significant short-term disruption with no clear solution. However, his announcement also provides some clarity. Now that they have been established, the market can stabilize to some extent, which is beneficial for long-term investors. Like any geopolitical situation, it always needs to be monitored regarding how the rest of the world reacts to it. Investors need to monitor changes very carefully, especially as the deadline for the implementation of tariffs approaches on April 5, 2025. For cryptocurrency enthusiasts, the situation calls for caution but also aims for long-term prospects as volatility eases.