Why did Trump Tariffs Trigger a Crypto Crash and Instant Recovery?

At one point, the world’s largest cryptocurrency by market cap was seen trading at about $91,000 – down an alarmingly long way from its recent all time high of $109,000 in December. 

The Bitcoin price crashed and recovered on Monday. Source: Bitcoin Liquid Index (BLX) via Brave New Coin

Other crypto assets, including Ethereum, Cardano, and Ripple’s XRP saw even worse declines on Monday. Meme coins like DOGE, SHIB, and TRUMP also tanked sharply on the tariff news.

While most of these crypto assets have since recovered after news that Mexico has signed an agreement with the US that delays the new tariffs from going into effect for another month – it’s important for investors to understand why the market crashed following the tariff announcement.

After all, this was only the first batch of tariffs from President Trump, with more planned for the coming weeks and months. So, it’s crucial for investors to understand the intrinsic link between tariffs and the crypto markets.

President Trump raised tariffs by 10% on all imports from China and about 25% each from Mexico and Canada over the weekend, resulting in a well over $2.0 billion hit to the crypto market on Monday.

Crypto market crash wipes over $2.0 billion in hours: Source: Coin Glass

The sell-off in cryptocurrencies, including Bitcoin, took many by surprise as the Trump tariffs have nothing to do with digital assets. So, why did the crypto market crash on Monday? In a one-word answer, it’s “uncertainty”. Markets love certainty, and they dislike uncertainty. Trump is unpredictable, which makes financial markets unpredictable.

Canada has already announced a 25% tariff on American goods in a show of retaliation – so will China, Mexico, the European Union, and perhaps any other trade partner that the Trump administration targets in 2025.

Simply put, the new US government is driving the world towards a global trade war, and trade wars are known to be inflationary and, therefore, they lead to pressure on consumer spending that tends to weigh on corporate bottom lines.

Put together, it’s a recipe for economic uncertainty. When that comes knocking on your door, your initial reaction as an investor is to take profits and build a cash reserve.

So, “profit-taking” after an incredible run in crypto prices and amidst fears of more challenging times ahead – that’s the first reason why digital assets took a big hit following Trump’s decision to raise tariffs against China, Mexico, and Canada.

Investors bailed on cryptocurrencies Monday because digital assets are seen as volatile, and volatility is what investors avoid like the plague amidst concerns of uncertainty. That’s what resulted in the crypto market crash on Monday.

Investors should note, however, that the subsequent recovery in crypto prices today suggests bulls are still very much in control.

That’s why Binance’s chief executive Richard Teng remains positive and sees crypto prices resuming their upward trajectory over the next few days.

“This too shall pass … the downturn is only temporary,” he wrote on X today.

Binance CEO says tariffs driven sell-off in crypto is temporary. Source: X

Teng’s optimism suggests it is time to consider loading up on cryptocurrencies on weakness – and what the crypto market crash and its subsequent recovery perhaps established on Monday is just how lucrative it can be for investors interested in making fast money.

After all, Bitcoin sits comfortably above the $101,000 level at writing. That translates to a more than 10% gain versus its intraday low. How many financial assets can realistically deliver such returns within hours?