The crypto market was in tatters late Sunday night after traders realized there wouldn't be a tariff reprieve before global stock markets opened Monday morning. Bitcoin (BTC +0.06%) fell below $100,000 and looked like it could break $90,000 before bouncing a bit. As of 10:00 a.m. ET Monday, Bitcoin is down 5.7% since the market closed on Friday and 2.1% in the last 24 hours.
Ethereum (ETH +0.01%) was the big mover, dropping over 20% within an hour on Sunday night. As I'm writing, the token is down 21.3% from Friday's close and 14.8% in the past 24 hours. Dogecoin (DOGE +0.64%) was another big loser, falling 21.4% since Friday and 12.8% in the past day.
CRYPTO: BTC
Key Data Points
Tariffs hit crypto first
The move in crypto was sparked by tariffs on goods imported from Mexico, Canada, and China that President Donald Trump announced on Saturday. That began a slew of retaliatory announcements from each country that could make exports more difficult.
Tariffs aren't unexpected, but the blanket tariffs of up to 25% were a surprise and so was the pace at which they will be implemented starting this week. Investors were also caught off guard that favored companies and political donors and friends were unable to avoid these tariffs.
As the one market that's traded 24/7, crypto was the first to drop on the news, but the stock market has followed Monday morning.
Inflation is back in focus
A big fear for crypto investors is the potential inflationary impact of tariffs on the market. Higher inflation generally leads to higher interest rates and higher rates drive growth stocks and crypto lower.
Cryptocurrencies like Bitcoin and Ethereum have been seen as inflation hedges, but that hasn't been the reality. In 2022 when inflation spiked, cryptocurrencies crashed in value.
Bitcoin Price data by YCharts
The better correlation for crypto historically has been growth stocks because they're higher-risk assets like cryptocurrencies. If growth stocks fall, which they are today, the market will likely hit cryptocurrencies as well.
Where does crypto go from here?
The tailwinds behind cryptocurrencies have been strong since early November, but now the rubber is hitting the road. The promise of more crypto adoption, better regulation, and more innovation needs to come to fruition.
If the gain in crypto was driven by speculation and that speculation unwinds, this could be a protracted decline in crypto for which tariffs were just the catalyst.
I think investors need to acknowledge the risks in crypto, which are similar to growth stocks, rather than viewing them as a hedge to the dollar, inflation, or the economy, which they haven't proven to be long-term.
Volatility is the name of the game
Crypto continues to be a highly volatile asset class and will magnify the movement of markets overall. With stocks trading near all-time highs and valuations at levels the market doesn't normally see without a recession, there's a lot of risk in the market today. And crypto may be the first place valuations fall, particularly in altcoins and everything not named Bitcoin. It's not clear if prices will go up or down long-term, but volatility is likely to remain high.
