The significant 12.19% decrease in the cryptocurrency market’s capitalization in February did not occur by chance. The recent imposition of tariffs caused Bitcoin [BTC] to drop to almost $92K. Now, Trump’s latest 25% tariffs on essential metals such as steel and aluminum are contributing to the downward pressure.
Amidst the dominance of his “America First” policy in the news, the question arises: will investors maintain their resilience for a recovery, or are we witnessing the beginnings of a crash similar to 2018, where Bitcoin saw a substantial double-digit decline?
Preparing for a Test of Endurance
Just two months into 2025, Bitcoin has already encountered two significant declines, each resulting in a reduction of over 10% in its valuation, bringing it down from six-digit figures to five.
Following the recent drop triggered by Trump’s high-stakes tariffs, there was a notable increase in Bitcoin deposits across all exchanges, surpassing 70K in a single day, marking the highest level this year.
Due to uncertainty surrounding interest rate reductions, investors are taking steps to reduce risks by scaling back on high-leverage transactions. Also, with a 25% tariff imposed on steel and aluminum imports, the Federal Reserve’s 2% inflation target might be moving further out of sight.
In the short run, Bitcoin has found stability within the $88K to $90K range, attracting interest from both institutional and individual buyers. However, given the complexity of the situation, could the actual BTC bottom be situated farther down?
Recalling 2018, the year Trump introduced a 10% tariff on Chinese imports, Bitcoin experienced a 72% plummet by the year’s end. Although a similar crash is not anticipated now, the impact of tariffs on the cryptocurrency market should not be underestimated.
As the Federal Reserve hesitates on rate adjustments, investor confidence teeters on the edge, and the historically bullish first quarter for Bitcoin fails to evoke fear of missing out (FOMO), 2025 appears to be a year where patience will face unprecedented scrutiny.
Are Traders Still Banking on the Relationship Between Bitcoin and Trump?
Considering the overarching trends, expecting a fresh inflow of capital into the market may be premature at this point. With short-term holders swiftly collecting profits after each downturn, adopting a steadfast HODL strategy could be the most prudent approach for now.
This dynamic clarifies Bitcoin’s current holding pattern – persistent HODLers and Exchange-Traded Funds (ETFs) keeping Bitcoin above the local low while short-term holders promptly cash out, and futures traders liquidate positions worth over $8 billion in merely ten days.
Yet, the question lingers: how long can Bitcoin sustain this cycle? While investors continue to support the Bitcoin-Trump alliance, their confidence is tested with each high-stakes trade decision.
If this delicate equilibrium falters, Bitcoin’s actual bottom might still be beyond the horizon. The crucial aspect now is how the administration manages the aftermath – whether it leads to elevated inflation and reduced rate cuts, or the contrary.
The imminent Consumer Price Index (CPI) report could yield some insights. Observing closely – the initiation of a 25% tariff on primary metals may only be the beginning.