Bitcoin Drops 1.8% as Trump Tariff Threats Loom

Bitcoin's price fell below $95,000 on Monday, marking a 1.8% decrease over the past 24 hours. This decline came after U.S. President Donald Trump threatened to impose new tariffs ahead of the Federal Reserve’s interest-rate decision. The original cryptocurrency had started the weekend above $96,000, but the tariff threats sent it tumbling.

Most altcoins also experienced losses, with XRP dropping 2.7% to $2.12, and Solana falling 0.8% to around $146. The market-wide decline indicates a broader sentiment of uncertainty and risk aversion among investors.

The Federal Reserve is widely expected to hold its benchmark interest rate steady on Wednesday. Traders have penciled in a 97% chance that the central bank will maintain a target range of 4.25% to 4.5% for a third meeting in a row. This decision comes as the Fed waits to see how the White House’s efforts to reshape global trade are affecting the U.S. economy and potentially adding to inflation.

Although Trump has repeatedly called on Fed Chair Jerome Powell to lower rates, the central bank has held interest rates steady. Powell's comments will be closely watched for any indications of the Fed's stance on the economy's direction. If Powell emphasizes an economic slowdown as a risk, risk assets could rally, suggesting that the Fed is leaning toward lower borrowing costs to stimulate the economy. However, Powell's remarks could also mirror Trump's negotiating tactics, preserving the Fed's maneuverability in the event of changes in Trump's trade policies.

The Fed is also scheduled to release a series of quarterly economic projections on Wednesday, which will indicate where each official on the Fed’s policy committee thinks interest rates should be by year’s end. In December, the officials forecast two rate cuts this year of a quarter of a percentage point, paring back projections from four.

Cryptocurrencies have rallied alongside stocks over the past couple of weeks as Trump has softened his rhetoric on tariffs. However, he floated new tariffs this weekend, stating that the U.S. would “begin the process of instituting a 100% tariff” on foreign movies to preserve an American cinema industry that’s purportedly dying. This announcement has added to the market's uncertainty and volatility.

In summary, Bitcoin's recent stumble is a reflection of the broader market's reaction to Trump's tariff threats and the upcoming Fed decision. The cryptocurrency's price movements highlight the sensitivity of the market to geopolitical and economic developments. As the Fed prepares to announce its rate decision, investors will be closely watching for any signals that could provide guidance on the future trajectory of the economy and financial markets. The combination of Trump's tariff threats and the Fed's rate decision has created a complex environment for investors, with the potential for further tariffs and the Fed's response to inflation and economic growth concerns adding layers of uncertainty. This has led to increased volatility in the market, with investors seeking clarity on the direction of monetary policy and trade relations.