Bitcoin and the broader cryptocurrency market are once again under pressure due to escalating trade tensions between the United States and China, marked by new rounds of tariffs. Bitcoin, the largest cryptocurrency, dropped to a low of $91,000 on Monday, with significant altcoins like Ethereum and Solana also taking a hit.
In a recent development, following the U.S. imposition of a 10% tax on all Chinese imports, China struck back with tariffs on select American exports, including oil and liquefied natural gas, effective February 10. Heightening the situation, China has initiated an investigation into Google for potential antitrust violations, further straining ties between the world’s two largest economies.
The turmoil in the financial markets has erased gains from a brief relief rally on Monday. This rally occurred after the Trump administration delayed tariffs on Mexico and Canada for a month. However, the initial announcement of U.S. tariffs over the weekend had already sparked a sharp decline in cryptocurrency values.
Investor confidence in riskier assets has been shaken significantly, with U.S. investors withdrawing a net $235 million from a dozen Bitcoin-focused exchange-traded funds (ETFs) on Monday. In addition, open interest in Bitcoin futures contracts on the Chicago Mercantile Exchange (CME) dipped by 4%, reflecting a more cautious stance among institutional investors.
President Donald Trump, known for his supportive stance on crypto, has inadvertently injected more volatility into the digital asset space. Cryptocurrencies did see gains after Trump’s election, but now they face a challenging environment filled with geopolitical tensions and regulatory hurdles.
Currently, Bitcoin is trading at around $98,970, approximately 13% below its all-time high. Meanwhile, U.S. ETFs invested in Ethereum experienced record trading volumes on Monday, with substantial liquidation of leveraged positions impacted by ongoing trade anxieties.
The iShares Ethereum Trust, managed by BlackRock, accounted for nearly half of the $1.5 billion traded among a group of nine ETFs. Ethereum’s price fell up to 27% on Monday, resulting in over $600 million in liquidations within perpetual futures markets, as reported by Bloomberg.
In the analysis of recent price movements, crypto analyst Ali Martinez pinpointed $92,180 as a crucial support level for Bitcoin, based on Market Value to Realized Value (MVRV) pricing bands. If this support does not hold, the next target might be $74,400. Despite the correction, Bitcoin traders are still seeing a profit margin of 3.36%.
Historically, local bottoms have formed when profit margins drop below -12%, indicating that Bitcoin might have more downside potential before reaching a true bottom. Additionally, the MVRV Momentum indicator has remained in negative territory since the start of the year, suggesting continued market fragility.
Featured image from DALL-E, chart from TradingView.com
