Crypto Volatility Alert- Markets Dropped Sharply Before Recovering
Crypto Volatility Alert– On February 3, cryptocurrency markets experienced a significant downturn before making a strong recovery. The market turbulence began when former U.S. President Donald Trump announced potential tariffs on Canada, Mexico, and China, causing widespread uncertainty. However, later statements from global leaders helped restore investor confidence.
Trump Paused Tariffs Following Negotiations
In a statement on X, Canadian Prime Minister Justin Trudeau confirmed that Trump had agreed to pause the 25% tariffs for at least 30 days. Trudeau emphasized Canada’s commitment to strengthening cooperation with the U.S., including a $1.3 billion border security plan that involved appointing a Fentanyl czar and reinforcing the U.S.-Canada border with additional personnel and helicopters.
Mexico’s tariffs were also temporarily halted. Mexican President Claudia Sheinbaum announced that the leaders had “reached a series of agreements” to enhance border security while pausing tariffs for one month.
Mixed Signals on Future Tariffs
Despite the temporary halt, Trump stated in a Bloomberg TV interview that the U.S. and Mexico had not finalized tariff agreements, leaving the possibility of implementation open. The uncertainty led to volatile movements in financial markets, including cryptocurrency.
Bitcoin and Altcoins Recovered After Initial Plunge
The crypto market, which initially reacted negatively to the tariff news, rebounded strongly after leaders confirmed the pause. Bitcoin (BTC) dropped to $92,000 but later surged past the $100,000 mark, reaching $101,731, according to CoinMarketCap.
Similarly, Ether (ETH) fell to $2,451 before recovering to $2,880. However, within the last 30 minutes, markets took a downturn, with ETH falling to $2,650 from $2,900.
Investor Sentiment Shifted Towards Greed
The Crypto Fear & Greed Index, which had previously indicated market fear, climbed to 72 out of 100, signaling growing investor optimism. Pav Hundal, lead market analyst at Swyftx, noted that the pause in tariffs brought relief, leading to a “complete recovery in many digital assets.”
“If the shadow of tariffs continues to recede, and it is a big ‘if,’ all you’re really left with is good news and economic data that you can at least hedge against,” Hundal said. He suggested that Bitcoin could soon reach new all-time highs if tariff threats remained low.
Potential Long-Term Impact of Tariffs on Crypto
Sean Dawson, head of research at decentralized protocol Derive.xyz, commented on the potential bullish sentiment driven by Trump’s executive order to establish a sovereign wealth fund.
“This is particularly relevant as Commerce Secretary nominee Howard Lutnick has been a strong advocate for the industry,” Dawson stated.
Meanwhile, Chris Chung, founder of Solana-based swap platform Titan, suggested that the initial crypto sell-off was an overreaction. He noted that digital transactions are not subject to tariffs, making the direct impact on cryptocurrency markets minimal.
“As people’s home currencies, like the Canadian dollar, plummet against the U.S. dollar, we will see more inflows into both USD-denominated stablecoins and crypto assets like Bitcoin and altcoins,” Chung explained.
Short-Term Volatility Persists
Despite the recovery, volatility remained high, with downward pressure on prices in the last 30 minutes. Market analysts suggested that while positive sentiment drove a temporary rebound, traders should remain cautious amid ongoing economic uncertainties.
As of now, the recent market gains appear to have slowed, with early-morning recoveries tapering off. The coming days will determine whether the crypto market can sustain its upward momentum or if further corrections are on the horizon.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrencies and stocks, particularly in micro-cap companies, are subject to significant volatility and risk. Please conduct thorough research before making any investment decisions.
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