Bitcoin Plummets 7% After Trump's Tariffs Announcement

Bitcoin (BTC) experienced a significant spike in volatility following the announcement of Trump's tariffs on Wednesday. Initially, Bitcoin surged to just over $88,600 as the market reacted to the news. However, as the full extent of the tariffs became clear, the cryptocurrency plummeted by 7%, wiping off more than $6,000 in value over approximately four hours. This sudden drop led to a cascade of liquidations among traders, with both long and short positions being affected.

The market had not fully anticipated the severity of the tariffs. Prior to the announcement, reports suggested a 10% baseline tariff would be imposed on all countries, with some countries facing higher tariffs. However, the actual tariffs were more onerous than expected, catching many traders off guard. This unexpected development resulted in a total of $487 million in liquidations for the 24-hour period, highlighting the impact of the tariffs on the cryptocurrency market.

The volatility in Bitcoin was not isolated to the cryptocurrency market. Traditional markets also felt the ripple effects, although they managed to close up on the day. The Nasdaq mini futures, for instance, fell by 6% from their peak before recovering slightly. This volatility underscores the interconnected nature of global financial markets and the potential for significant disruptions following major policy announcements.

Looking ahead, the market's reaction to the tariffs remains uncertain. While U.S. stocks may open significantly down, there is also a possibility of a bounce. The weekly chart suggests that a rally could still be on the horizon, but the market's bearish sentiment could lead to a further fall in the S&P 500, potentially down to the low $5,000 region. The Stochastic RSI indicator shows a cross-up of the indicators, which has historically heralded previous rallies, adding to the uncertainty.

President Trump's administration faces a delicate balancing act. The goal is to weaken the dollar and lower the 10-year bond yield to facilitate refinancing the debt at a better interest rate. However, this strategy could put the economy at risk of freefall. The tariffs are inherently bearish, and the U.S. economy is likely to face significant challenges in the near term. Quick negotiations and deals with other countries will be crucial to mitigate the damage and stabilize the market.

Bitcoin's price has shown some recovery, up around 1.3% on Thursday. However, the 4-hour chart indicates that the cryptocurrency has reached a resistance level. The recent long red candle, representing Wednesday's price action, stands out from the previous days. The bulls had momentum to break through the horizontal resistance and the descending trendline, but the price plummeted as the full extent of the tariffs became known. The upward spike stopped just short of making a local higher high, suggesting that the sideways and potentially downwards choppiness could resume.

The weekly chart for Bitcoin still shows some bullish signs, with a candle open above the descending trendline potentially indicating a trend change. However, the bulls are running out of time. The descending trendline is converging with the support at $80,000, and there is only one more week before the price must either break out or break down. If the Stochastic RSI indicator lines roll over, a breakdown to $70,000 could be the favored option, adding to the uncertainty in the market.