Economic Turmoil: Crypto Market Loses 25% Of Value As Recession Worries Mount
The crypto market is experiencing a significant downturn this week, driven by growing concerns over a potential trade war and disappointment surrounding the US government’s crypto reserve plans. A recent interview with President Donald Trump, in which he hinted at the possibility of a recession, has further unsettled investors.
Crypto Market Plummets: XRP, Solana, And Cardano Follow Bitcoin’s Downtrend
Bitcoin, the flagship cryptocurrency, has fallen nearly 4% in the last 24 hours, dropping toward the $79,000 mark—a level not seen since mid-November. Ethereum (ETH), has taken a more significant hit with a 10% drop toward $1,860, price not seen since August.
Other established cryptocurrencies are also feeling the strain; XRP has declined by 4%, Solana (SOL) by 7%, and Cardano (ADA) by 8% as market participants continue to retreat from riskier assets.
The backdrop to this volatility includes the continuous aggressive tariff policies imposed by the new President Donald Trump administration towards countries like Canada, China, and Mexico.
These actions have sparked fears of a trade war, which could exacerbate inflation and increase the cost of imported goods. As a result, investors are gravitating toward safer investments, steering clear of the notoriously volatile cryptocurrency market.
In a Fox News interview over the weekend, Trump acknowledged that the aggressive tariff strategy could lead to a recession, describing the country as entering a “period of transition.”
This commentary has raised alarms among investors, particularly as Trump did not rule out the possibility of a recession occurring this year. Jake Ostrovskis, an over-the-counter trader at Wintermute, noted that the former president emphasized the likelihood of “short-term economic pain,” amplifying market anxieties.
Diminished Risk Appetite And Fed Rate Outlook
Adding to the uncertainty is the recent letdown regarding the White House’s plans for a national crypto reserve. Many in the crypto community had anticipated that Trump’s proposal would involve substantial government purchases of Bitcoin and other cryptocurrencies, potentially stimulating demand and boosting prices.
However, investors were disappointed when it was revealed that the government would refrain from making additional crypto purchases and would only retain cryptocurrencies seized from illegal activities.
Haider Rafique, the global chief marketing officer at crypto exchange OKX, expressed disappointment in the lack of immediate buying pressure from the formalization of a Bitcoin reserve.
“While establishing a Bitcoin reserve is a significant milestone, it does not create immediate buying pressure, disappointing those expecting aggressive accumulation,” Rafique stated.
This downturn in the crypto market also follows a broader trend of declining risk appetite among investors. Since the Federal Reserve announced in December that it would not implement as many interest rate cuts in 2025 as previously anticipated, the crypto market has lost approximately 25% of its total market cap.
The optimistic outlook that many had following Trump’s election in November has quickly turned sour, as macroeconomic factors weigh heavily on the market.
Featured image from DALL-E, chart from TradingView.com
