Bitcoin Drops 1.5% to $106,811.6 Amid U.S. Trade Tariff Uncertainty

Bitcoin's price experienced a significant decline, falling to $106,811.6 by 01:39 ET (05:39 GMT) on Tuesday, extending overnight declines as risk appetite was dampened by growing uncertainty over U.S. trade tariffs and the impact of a sweeping tax and spending cut bill backed by President Donald Trump. This drop comes after a period of volatility in the cryptocurrency market, where Bitcoin had previously surged past $108,000, driven by easing geopolitical tensions and strong institutional buying. The recent selloff in the crypto market was broad, with Bitcoin falling over 1.5% to $106,811.6, while other altcoins like Ether also saw significant declines.

The uncertainty in the U.S. market, exacerbated by fears of a slowing economy and stubborn inflation, has led to a broader selloff in risk assets. The U.S. stock market plunged on Friday, marking its worst single-day loss since December 2024. This market turmoil has increased investor anxiety, particularly over potential tariffs and the impact of a weakening consumer outlook. President Trump's repeated threats to impose 25% duties on cars, semiconductors, and pharmaceuticals have added to the market's jitters. The housing market has also shown signs of faltering, with existing home sales down 4.9%, and the U.S. services sector shrank at its fastest pace in over two years.

Markets were grappling with two main points of uncertainty– Trump’s plans for trade tariffs, ahead of a July 9 deadline for agreements, and the passage of a controversial tax and spending cut bill in the Senate. On the trade front, the U.S. and Canada were expected to resume talks after Ottawa seemingly acquiesced to Trump by removing a major digital sales tax on U.S. firms. But relations with Japan appeared strained after Trump lashed out against the country for allegedly not buying U.S. rice imports. Trump also threatened to end trade negotiations with Tokyo. Major global economies have until July 9 to reach a trade deal with the U.S., failing which they will be slapped with steep U.S. tariffs ranging from 20% to as high as 50%.

On the fiscal front, U.S. Senators were seen embarking on a marathon vote session to debate and eventually vote on Trump’s “big beautiful bill” act, amid heightened concerns over its fiscal impact. A non-partisan analysis showed the bill will add $3.3 trillion to U.S. debt in the next decade if it passes in its current form. This comes with U.S. debt already at a record-high $36 trillion. Markets fear that the bill could further increase the U.S. fiscal deficit and increase the risk of a government default, especially if the spending cap is not raised later this year.

While trade and fiscal concerns do not directly affect crypto markets, they are largely vulnerable to shifts in market sentiment, due to their speculative nature. The Federal Reserve is now under intense scrutiny, with traders predicting a 55% chance of interest rate cuts by the end of 2025. This anticipation of rate cuts has contributed to the market's volatility, as investors reassess their positions in light of potential changes in monetary policy. The market's reaction to options expirations, with 80% of S&P 500 stocks closing lower, further underscores the heightened uncertainty and risk aversion among investors.

The decline in Bitcoin's price to $106,000 reflects the broader market sentiment, as investors seek safe-haven assets amidst the economic and political uncertainties. The cryptocurrency market's sensitivity to macroeconomic factors and geopolitical risks has been evident in recent weeks, with Bitcoin's price movements closely tracking developments in the U.S. economy and trade policies. As the market awaits clarity on the tax bill and trade policies, Bitcoin's price is likely to remain volatile, with investors closely monitoring any developments that could impact the broader economic outlook.

Bitcoin took little support from major corporate holders Strategy, formerly MicroStrategy, and Metaplanet Inc announcing more acquisitions of the crypto this week. Strategy purchased over $500 million worth of coins, while Metaplanet added $108 million of Bitcoin. Crypto markets largely lagged strength in other risk-driven markets, specifically equities, as gains in technology shares saw Wall Street notch record highs in recent sessions. Broader crypto prices moved in a flat-to-low range, seeing limited relief after logging steep losses in June. Barring Bitcoin, crypto prices largely retreated in the prior month. World no.2 crypto Ether fell 0.2% to $2,459.01, while XRP rose 1.2% to $2.2169. Solana rose 0.5%, while Cardano was flat after sliding nearly 17% in June. Among memecoins, Dogecoin fell 1.6%, while $TRUMP fell 3.2%.