Crypto Market Plummets 5.8% Amid U.S.-China Trade Tensions

The crypto market experienced a significant downturn on Monday, with Bitcoin (BTC) and Ethereum (ETH) leading the decline. The crash was primarily attributed to the escalating trade tensions between the U.S. and China, as both countries imposed steep tariffs on each other's imports. The U.S. initially targeted China with new tariff measures, which prompted China to retaliate with a 34% tariff on U.S. imports starting April 10. This tit-for-tat exchange sent shockwaves through global markets, causing a selloff in equities, commodities, and cryptocurrencies.

The crypto market shed approximately $200 billion in value as prices plummeted. Leveraged traders were particularly hard hit, with losses amounting to $1.1 billion, with long positions suffering the most. The market rout was compounded by rising inflation fears and investor selloffs, which shook global markets and sent the VIX index soaring past 60, indicating heightened market turbulence.

With notable selloffs in major global stock market indexes, the cryptocurrency industry has not been spared in the widespread panic selling. The total crypto market cap dropped by around 5.8 percent to hover about $2.38 trillion. Bitcoin’s (BTC) price had dropped nearly 6 percent in the last 24 hours to trade around $75,359. Ethereum (ETH) price dropped over 10 percent in the past 24 hours to reach a daily low of about $1,386 before rebounding towards $1,425.

As a result of the heightened volatility, more than $404 million was liquidated from the crypto leveraged markets, with over $304 million involving long traders. The wider crypto market has suffered bearish sentiment amid low demand from whale investors. For instance, the U.S. spot BTC ETFs recorded a net cash outflow of about $327 million, led by BlackRocks IBIT.

Analysts believe that the escalating trade war could lead wealthy Chinese citizens to turn to cryptocurrencies as a means to protect their wealth and bypass capital controls. This shift in investor behavior could potentially reshape the crypto landscape, as more individuals seek alternative investment options amidst the financial uncertainty. Despite the bearish sentiment, some analysts remain bullish on the long-term prospects of the crypto market. They argue that the current downturn presents an opportunity for investors to accumulate assets at discounted prices. However, the immediate outlook remains uncertain, with markets pricing in significant Fed rate cuts as a response to the economic fallout from the trade war.

The global trade war has redefined investor strategies, with tariffs, market crashes, and inflation reshaping the crypto space. As the trade tensions continue to escalate, investors are likely to remain cautious, with the potential for further volatility in the crypto market. The situation underscores the interconnected nature of global financial markets and the impact of geopolitical events on investor sentiment and asset prices. The wider crypto market will likely be trapped in further bearish sentiment until the ongoing tariff trade wars calm down. From a technical analysis standpoint, BTC price could experience a $10k drop in the coming days towards the support range between $63k and $67k, which coincides with the average price for Strategy’s BTC trove accumulation. With the wider altcoin market, led by ETH, moving in tandem with BTC price action, more pain is inevitable. Nevertheless, on-chain data shows now is a good time for long-term investors to begin accumulating altcoins, based on the MVRV mid-term opportunity and danger zone divergence indicator.