Trump’s economic dealings have brought chaos to traditional markets and the crypto markets as $300 billion was wiped from Bitcoin’s surge.
On February 3, President Trump announced a $100 billion investment from Taiwanese semiconductor company TSMC followed by large tariffs on Canada, Mexico and China.
Bitcoin and the traditional markets reacted strongly, with the S&P 500 (SPX) falling -1.7% % and BTC reversing to its previous lows before the US Crypto Reserve announcement. What’s next?
What’s happening to the crypto market and TradFi?
Trump’s Crypto Reserve announcement on March 2 propelled the cryptocurrency market upwards, with Bitcoin reaching local highs of $94,770 from $85k.
After high expectations on Trump’s announcements on March 3, the crypto market, along with the traditional financial sector, has witnessed strong sell offs.
The total cryptocurrency market fell 14%, losing $300 billion as tokens revert below their previous prices before the surge.
For Bitcoin, previous calls for $71k or lower could be back on the cards as Ethereum fell below its previous $2,100 support level and is now close to losing its $2k price tag.
Things are not looking any better for stocks as all top tech companies fell by 2.4 – 3% as the S&P 500 fell 1.7%, wiping out $1.5 trillion in market cap with the chart eyeing a potential drop to mid-5000s from where it currently sits at $5,849.
In addition to Trump’s tariffs, the Wall Street Journal published a report on recent US diplomacy with Ukraine.
According to the report, the Trump administration had pulled out of new weapons financing and that the US planned to loosen sanctions on Russia despite the ongoing conflict.
Macroeconomic factors are largely to blame for the market’s performance as both Bitcoin and the traditional financial markets play hand-in-hand to Trump’s volatile maneuvers.
Macroeconomics: Why did Bitcoin and crypto markets dump?
On Truth Social, President Trump surprisingly announced the formation of a US Crypto Reserve was indeed going ahead, and listed Ripple’s XRP, Solana (SOL) and Cardano (ADA) as three tokens that would be included.
Following the announcement, all three tokens surged with Cardano gaining the most at over 40%+. Bitcoin and Ethereum were then mentioned as being included in the Reserve along with other “cryptocurrencies.”
Bitcoin pushed to local highs of $94k from its volatile lows in the mid-80s. Meanwhile, in the traditional markets, the S&P 500 suffered from selling pressure, which had been ongoing for the past week.
On Monday’s open, Trump told news reporters that an important investment announcement would be made.
The investment to be announced was a $100 billion deal with semiconductor manufacturers TSMC, bringing thousands of jobs, new facilities, and “hundreds of billions of Dollars” into the economy.
Bitcoin and the S&P 500 settled at their recent highs for a moment until Trump went forward by confirming that 25% tariffs on Mexico and Canada will go into effect on March 4.
Tariffs on China will also be raised by 20% after signing a new executive order. Following the news, the S&P (SPX) sold off, losing $1.5 trillion as the chart fell -1.7%.
Looking at the crypto markets, Bitcoin sold off sharply from its highs back to where it was previously trading around $83k. The rest of the market quickly retraced with Ethereum and Solana taking most of the trauma.
Where do the financial markets go from here?
Following Trump’s economic deals and tariffs, the traditional markets and crypto both seem to be in a rough place.
Before Bitcoin’s Crypto Reserve debut, analysts, including BitMex’s Arthur Hayes, were calling for BTC to touch $71k lows as a bottom.
Reasons for Bitcoin’s decline to such a price may correlate with suggestions that institutional buyers are using BTC as leverage against CME futures. As BTC goes down, institutional buyers may sell their ETF holdings to buy back later.
According to Markus Thielen’s 10x Research, 44% of Bitcoin ETF buyers are real long-term investors. Meanwhile, 56% of them may be using the ETFs for market strategies against traditional stocks.
Despite this data, with the traditional stocks in a sorry state, macro factors may hold the real power as the crypto market and TradFi match in performance and reactions.
For crypto and bitcoin, the broader bullish trend of the market is still intact, whether Bitcoin reaches $70k or even $50k, which would both correspond to previous strong support levels.
It’s important to remember that even during the “Xi pump” in 2019 where BTC surged +40% on positive news from China, the surge was quickly reversed and Bitcoin went lower than before.
In the long term, the outlook is bright and technical structures are still set for continuation once Bitcoin finds a bottom to settle at. Times like this prove that time in the market beats timing in the market.
