Bitcoin slipped below $100,000 today for the first time since January, succumbing to renewed trade war pressures as China’s retaliatory tariffs on U.S. goods took effect, puncturing a brief rally that followed President Trump’s decision to pause tariffs on Mexico and Canada just one day earlier.
The cryptocurrency traded near $99,300 this morning as markets digested China’s announcement of additional tariffs on coal, liquefied natural gas, crude oil, and select vehicles—a direct response to the Trump administration’s 10% tariff on Chinese imports that began February 1.
The Tariff Rollercoaster
The past four days have subjected cryptocurrency markets to whipsaw volatility unprecedented in the young Trump administration, as investors struggled to price in rapidly shifting trade policy.
Saturday, February 1: President Trump signed an executive order imposing 25% tariffs on imports from Mexico and Canada, alongside 10% tariffs on Chinese goods, citing the “sustained influx of illicit opioids and other drugs” and immigration concerns as national security justifications. The tariffs were set to take effect Tuesday, February 4.
Bitcoin immediately plunged from around $106,000 to as low as $91,212 as investors fled risk assets. The selloff was severe and indiscriminate—Ethereum tumbled to $2,143, while smaller cryptocurrencies like XRP and Solana posted declines of 6-8%. Total liquidations across cryptocurrency derivatives markets exceeded $2.23 billion in 24 hours, with long positions suffering $377.6 million in Bitcoin liquidations and $479 million in Ethereum liquidations.
Monday, February 3: In a dramatic reversal, Trump agreed to a 30-day pause on tariffs for Mexico and Canada, reportedly following intensive negotiations with the leaders of both nations. Bitcoin immediately rebounded, climbing back above $101,000 as risk appetite returned and investors who had sold in panic scrambled to re-enter positions.
The rally proved short-lived. Conspicuously absent from the tariff pause announcement was any mention of China—the world’s second-largest economy and a critical player in global trade. The Chinese tariffs remained scheduled to proceed as planned.
Tuesday, February 4 (Today): China announced retaliatory tariffs targeting specific U.S. exports including energy commodities and vehicles, making clear that Beijing has no intention of backing down from what increasingly appears to be an extended trade confrontation. Bitcoin broke back below $100,000, erasing Monday’s gains and leaving traders uncertain about the path forward.
Why Tariffs Are Crushing Crypto
Bitcoin’s sensitivity to tariff announcements may surprise crypto enthusiasts who view the digital asset as a hedge against geopolitical uncertainty and fiat currency debasement. In practice, however, Bitcoin has traded more like a risk asset—correlated with technology stocks and sensitive to macroeconomic shocks—than the “digital gold” narrative suggests.
Several mechanisms explain why tariffs pressure cryptocurrency prices:
Risk-Off Sentiment: Trade wars create economic uncertainty that causes investors to reduce exposure to speculative assets. When tariff headlines dominate, capital flows toward perceived safe havens like U.S. Treasuries, gold, and cash rather than volatile cryptocurrencies. Despite Bitcoin’s fixed supply and decentralized nature, it remains a relatively new asset class without the centuries of history that underpin gold’s safe-haven status.
Growth and Inflation Concerns: Tariffs function as a tax on imported goods, raising prices for consumers and potentially reigniting inflation that had begun to moderate. Higher inflation typically prompts central banks to maintain restrictive monetary policy—exactly the tight money environment that historically suppresses Bitcoin prices. Simultaneously, trade wars disrupt global supply chains and economic growth, reducing the risk appetite that fuels cryptocurrency speculation.
Dollar Dynamics: Paradoxically, trade war uncertainty often strengthens the U.S. dollar as global investors seek stability, even when the U.S. is the source of the uncertainty. A stronger dollar creates headwinds for dollar-denominated assets including Bitcoin, making them relatively more expensive for international buyers.
Derivatives Leverage: The cryptocurrency market’s heavy use of leverage amplifies price swings. When Bitcoin drops sharply, leveraged long positions face margin calls and forced liquidations, creating cascading selling pressure that pushes prices lower than fundamental factors alone would justify. The $2.23 billion in liquidations over the weekend demonstrates how leverage magnifies tariff-induced volatility.
Corporate Treasury Concerns: Increasingly, public companies hold Bitcoin on their balance sheets as a treasury asset. Trade war-induced recession fears threaten corporate earnings and cash flow, potentially forcing treasury Bitcoin sales to meet operational needs or satisfy nervous boards of directors.
Broader Market Carnage
Bitcoin’s struggles today reflect broader cryptocurrency market weakness, with virtually all major digital assets posting losses:
Major Cryptocurrencies (approximate 24-hour performance):
- Bitcoin (BTC): Down 1-2%, trading near $99,300
- Ethereum (ETH): Down 2-3%, struggling to hold $2,750
- XRP: Down 3-4%
- Solana: Down 2-3%
Market Indicators:
- CoinDesk 20 Index: Down approximately 3%
- Total crypto market capitalization: Declining toward $3 trillion
- Bitcoin dominance: Holding steady around 62% as altcoins struggle equally
The uniform selling pressure indicates macro factors are overwhelming crypto-specific developments. Positive news that would normally support prices—including growing institutional adoption and progress on regulatory clarity—are being ignored as investors focus solely on tariff headlines.
Derivatives markets paint a particularly bearish picture. Open interest in Bitcoin futures has declined modestly as traders reduce exposure, while funding rates for perpetual swaps have turned negative, indicating shorts are paying longs—a sign of bearish sentiment prevailing.
Critical Support Levels
From a technical analysis perspective, Bitcoin’s break below $100,000 raises concerns about further downside. The psychologically significant $100K level had provided support multiple times since Bitcoin first breached it in early January, and losing it today suggests weakening buying pressure.
Traders are now watching several key support zones:
$95,000-$97,000: The first major support area where Bitcoin consolidated in late January. A breakdown below this range would signal additional technical weakness.
$90,000-$92,000: Where Bitcoin briefly touched during the February 1 tariff panic. Returning to this level would complete a full round-trip reversal of Monday’s relief rally.
$85,000-$88,000: A deeper support zone that would represent approximately 20% decline from January’s all-time high near $109,000—a significant correction but still within normal parameters for Bitcoin bull markets.
Conversely, reclaiming $100,000 on a sustained basis would signal that today’s weakness represents a temporary setback rather than the beginning of a deeper correction. Bulls argue that Bitcoin holding above $95,000 despite severe tariff headwinds demonstrates underlying strength and suggests prices will rebound once trade uncertainty resolves.
Market Expert Perspectives
Cryptocurrency analysts are divided on whether the current tariff-driven selloff represents a buying opportunity or the start of a prolonged downturn.
Bears emphasize that trade wars rarely resolve quickly and that the economic damage from sustained tariffs could trigger recession—historically negative for risk assets including Bitcoin. They note that China’s retaliatory response today demonstrates Beijing’s willingness to engage in extended economic confrontation rather than capitulating to U.S. pressure.
Bulls counter that tariffs could ultimately benefit Bitcoin by weakening confidence in fiat currencies and highlighting the value of apolitical, censorship-resistant money. Jeff Park from Bitwise Asset Management suggested that a sustained tariff war would be “amazing” for Bitcoin long-term by accelerating the erosion of the dollar-centric global financial system. However, he acknowledged that the path from here to there could be “choppy” as markets adjust to the new reality.
Some analysts are focusing on the technical picture. Ben Kurland noted that Bitcoin is “holding up better than the rest of the market,” observing that while equities have sold off sharply on tariff news, Bitcoin’s declines have been more modest on a percentage basis. This relative strength could indicate that Bitcoin is finding a floor even as traditional risk assets struggle.
Geoff Kendrick from Standard Chartered warned investors to prepare for continued volatility, noting that trade policy has become the dominant driver of risk sentiment and that further tariff announcements—or escalations from China—could arrive at any time.
What Comes Next
As Bitcoin trades below $100,000 for the first time in over a month, the path forward depends largely on developments outside the cryptocurrency market’s control.
Tariff Escalation Scenarios:
- Worst Case: China responds with additional retaliatory measures, Trump escalates further, and a full-scale trade war develops. This scenario would likely push Bitcoin significantly lower as recession fears mount.
- Muddle Through: Tariffs remain in place but don’t escalate further, creating persistent uncertainty that keeps risk appetite suppressed and Bitcoin range-bound.
- Resolution: Trump and Chinese leadership negotiate a de-escalation, tariffs are rolled back, and risk assets including Bitcoin rally sharply.
Bitcoin-Specific Catalysts: Despite macro headwinds, several crypto-specific developments could support prices:
- Continued institutional adoption through Bitcoin ETFs
- Progress on regulatory clarity from crypto-friendly Trump appointees
- Corporate treasury buying, particularly if companies view current prices as attractive entry points
- Technical support levels holding, preventing deeper corrections
Timeline Considerations: The 30-day pause on Mexico and Canada tariffs expires in early March. If those tariffs are reinstated—or if China-U.S. tensions escalate before then—cryptocurrency markets could face renewed volatility. Conversely, successful negotiations leading to tariff rollbacks could trigger substantial relief rallies.
For now, Bitcoin investors face a challenging environment where macroeconomic policy uncertainty overshadows the positive fundamental developments in cryptocurrency adoption and regulation. Today’s break below $100,000 serves as a reminder that Bitcoin, despite its decentralized architecture and fixed supply, remains tightly coupled to traditional financial market sentiment—at least in the short term.
This article reflects information available as of February 4, 2025.
