Bitcoin Dips Below $97,000: Trump Tariffs Spark Market Downturn

Bitcoin, the world's leading cryptocurrency, has taken a tumble, dipping below the $97,000 mark following President Donald Trump's recent tariff orders. The move has sent shockwaves through the crypto market, with smaller cryptocurrencies also experiencing significant declines. As investors grapple with the implications of these geopolitical events, let's delve into the reasons behind the market downturn and explore potential strategies for capitalizing on these trends.



Trump's Tariffs: A Double-Edged Sword for Cryptocurrencies

Trump's tariffs, which include a 25% tariff on Canadian and Mexican goods and a 10% tariff on Chinese imports, are expected to have significant impacts on the global economy. These tariffs can lead to increased costs for imported goods, benefiting domestic businesses but potentially causing inflation due to higher prices for consumers. Additionally, they may result in trade disputes and economic uncertainty, which can negatively affect financial markets, including cryptocurrencies like Bitcoin.

In the long term, the effects of Trump's tariffs on cryptocurrencies are uncertain. While some analysts, like Jeff Park of Bitwise Asset Management, believe that a sustained tariff war could be "amazing" for Bitcoin due to a potential weakening of the dollar and U.S. rates, others argue that Bitcoin may respond negatively to uncertainty around the trade war in the short term. This is because Bitcoin often trades like a risk asset in the short term, and investors may pull back from riskier assets like crypto during periods of uncertainty.

Moreover, the correlation between Bitcoin's price movements and traditional financial markets, such as the S&P 500, has been increasing. This means that Bitcoin's price movements may be influenced by broader market trends and geopolitical events, including Trump's tariff policies. If the proposed tariffs on Mexico and Canada take effect, they could disrupt traditional and digital asset markets, leading to increased volatility in cryptocurrencies like Bitcoin.



Smaller Cryptocurrencies: Reacting to Market Downturns

Smaller cryptocurrencies, often referred to as altcoins, tend to react more significantly to market downturns compared to larger cryptocurrencies like Bitcoin. This is due to their lower market capitalization and higher volatility. For instance, during the recent market decline on February 3, 2025, Ethena (ENA), an altcoin, dropped by 8.7% in a single day, while Bitcoin only experienced a 3% decline (Source: Materials).

To identify undervalued assets during market downturns, investors can employ the following strategies:

1. Fundamental Analysis: Evaluate the project's technology, team, roadmap, and partnerships. For example, Ethena's (ENA) unique features and partnerships could make it an attractive investment during a market downturn, as its fundamentals remain strong despite the price decline.
2. Relative Strength Index (RSI): Use the RSI indicator to identify oversold conditions. If an altcoin's RSI is below 30, it might be undervalued and a good candidate for investment. For instance, during the February 3, 2025, market decline, ENA's RSI could have been checked to determine if it was oversold.
3. Support and Resistance Levels: Identify key support and resistance levels for the altcoin. If the price is trading near or below a significant support level, it might be undervalued. For example, ENA's key support level of $0.938 could have been monitored to determine if it was holding or breaking down.
4. Market Capitalization: Consider the altcoin's market capitalization relative to its peers. Smaller-cap altcoins might be more undervalued during market downturns, as they are more susceptible to price swings. For instance, ENA's market capitalization could have been compared to other altcoins to assess its relative value.
5. Diversification: Allocate a portion of your portfolio to smaller-cap altcoins to take advantage of potential undervalued opportunities. This strategy can help investors achieve higher returns during market recoveries, as undervalued altcoins often experience more significant price increases than larger cryptocurrencies.

By employing these strategies, investors can identify undervalued altcoins during market downturns and potentially benefit from their recovery. However, it is essential to remember that these strategies do not guarantee success, and thorough research and risk management are crucial when investing in the crypto market.

In conclusion, the recent market downturn, sparked by President Trump's tariff orders, has led to a decline in Bitcoin's price and a tumble for smaller cryptocurrencies. While the long-term effects of Trump's tariffs on cryptocurrencies are uncertain, investors can capitalize on these trends by diversifying their portfolios, timing the market, investing in Bitcoin ETFs, and staying informed. Additionally, identifying undervalued altcoins during market downturns can provide opportunities for significant gains as the market recovers.