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The price of Bitcoin rose back to $100,000 on Monday afternoon after dropping to $95,000 in the morning. This volatility was sparked by President Donald Trump’s new trade tensions with Canada, Mexico, and potentially China, which created turmoil in the crypto market.
Over the weekend, Trump announced new taxes on imports from the U.S.’s top trade partners. Imports from Canada and Mexico will be taxed at 25%, while Chinese goods will be taxed at 10%. Trump made an exception for Canada’s energy exports, which the U.S. relies on, and issued a lower 10% tariff.
He also reiterated a threat to issue tariffs on imports from the European Union, which said it would “respond firmly” to any action. Canada has already announced its own retaliatory tariffs on U.S. goods, beginning with a 25% tariff on $20.4 billion worth of goods. Mexico said it will announce retaliatory tariffs but has not released additional details. China has said it would challenge the tariffs at the World Trade Organization.
Although cryptocurrencies aren’t directly impacted by tariffs, the economic uncertainty that can emerge as a result can affect them. During such times, investors tend to be willing to snag a profit when they can from volatile assets and rely on more stable alternatives.
Bitcoin, the leading cryptocurrency, fell to $95,000 in the morning but recovered in the afternoon, hovering around $101,000. As a result, the entire crypto market bounced back by the afternoon as investors may have seen it as a buying opportunity.
In the afternoon, Ether, the second-largest crypto by market cap, was down by almost 7.6%. Tesla (TSLA-6.50%) CEO and senior Trump advisor Elon Musk’s favorite meme coin, Dogecoin, was down by almost 0.37%, while the president’s $TRUMP meme coin— which he announced late last month — fell by almost 8%. First Lady Melania Trump’s own meme coin, $MELANIA, was down 9%.
Shares of crypto exchange Coinbase (COIN-1.87%) and business-intelligence firm Microstrategy (MSTR-2.92%), which has kept up its Bitcoin buying spree, recovered by the afternoon, too.
It’s not just crypto that’s going through a rollercoaster ride. The Dow Jones Industrial Average and the S&P 500 were down at market open but recovered by the afternoon.
“These announcements have come as a shock to many investors who expected tariffs would only be imposed if trade negotiations failed,” Goldman Sachs (GS-3.66%) analysts said in a note Sunday.
Goldman estimates that Trump’s tariffs would reduce its S&P 500 earnings per share by roughly 1% to 2% for every 5-percentage-point increase in the tariff rate. Without taking into account any additional impacts, the investment bank estimates a 2% to 3% hit to the S&P 500 companies’ earnings per share.