The crypto market continued to swoon this week following a collapse in values last weekend. It all started with tariffs announced last Saturday, which seems like a year ago at this point. The stock market recovered some of its losses, but the crypto market can't say the same.
According to data provided by S&P Global Market Intelligence, Ethereum (ETH 1.25%) fell 19.8% from last Friday's close, Solana (SOL 1.60%) is down 14.7%, Cardano (ADA 3.69%) is down 24.2%, and XRP (XRP 0.50%) is off 19.2%.
CRYPTO: ETH
Key Data Points
Tariffs and the market scare
On Sunday night, the market realized the tariffs President Trump had announced a day earlier may actually take effect this week. China, Mexico, and Canada were the initial targets, and rhetoric heated up Sunday night, so while the stock market slept, the crypto market tanked, highlighted by Ethereum dropping 20% in an hour.
But by mid-morning on Monday, the tariffs on Canada and Mexico had been put off for the time being. Stocks rallied, but crypto markets remained relatively muted in response.
A change of tune
Ethereum has been one of the big outliers recently after being the hottest blockchain in the last cycle. But the new launches, like meme coins have been on Solana, and innovations in finance are moving toward faster, cheaper chains like Solana and XRP.
That idea that utility blockchains are gaining favor got momentum late in the week when Caroline Pham, acting chair of the Commodity Futures Trading Commission, said she is planning a digital assets forum with the leaders of Ripple (XRP), Circle (USDC), Coinbase, and others to discuss using stablecoins as collateral for trades and potentially tokenizing some transactions.
This is the kind of innovation the industry wants to see, but the medium of exchange, stablecoins, could mean less value accrues to the underlying blockchain tokens. This has always been a risk to the value of the tokens themselves.
The market's waning optimism
Since early November, the market has been pushing cryptocurrencies higher on the hope that regulatory clarity and a booming economy would drive values higher. But a few things have hit growth stocks and crypto at the same time this week.
First, investors are questioning the return on investment for some of the biggest tech companies in the world and whether or not they'll keep the industry growing indefinitely. There's been some weak guidance from tech stocks, and that's caused a bit of a "risk off" trade.
Second, economic data hasn't been particularly bullish. In January, 143,000 jobs were added, below the 170,000 expected by economists. And while there's a growing economy, there are also signs that growth may not be as strong as expected.
Finally, President Trump has brought a new level of uncertainty into the market, including around tariffs. Investors are worried that tariffs could be a negative for the economy; inflation and any kind of uncertainty will cause a decline in high-risk assets, like cryptocurrencies.
I'm not surprised to see a decline this week, and if data gets worse, the decline could continue despite more use cases and more innovation than ever on the blockchain.
