Bitcoin and Ethereum experienced significant declines today, erasing gains from a recent rally prompted by Trump's announcement about cryptocurrency reserves. Investors are now navigating through adverse macroeconomic data and tariff uncertainties that create a precarious environment for risk assets.
What caused the decline in Bitcoin and Ethereum? In the past 24 hours, Ether plummeted by 14.7%, reaching a low of $2,082, the lowest value since November 2023. Bitcoin also suffered a drop of 10%, trading at $83,704. The GMCI 30 index, which records the performance of top cryptocurrencies, fell by 14%, highlighting the broad market downturn.
The latest macroeconomic indicators did little to inspire confidence among traders. The ISM PMI data for February revealed disappointing figures, with employment and new orders slipping below the neutral mark of 50, while price levels surged. This combination of weak employment signals alongside inflationary pressures has many investors concerned about potential recession risks. According to the Atlanta Fed's GDPNow forecast, Q1 real GDP growth is projected at -2.8%, further solidifying fears of an economic downturn.
Adding to the uncertainty, President Trump confirmed the implementation of 25% tariffs on imports from Canada and Mexico, effective Tuesday. An additional 10% tariff on imports from China will increase to 20%, which is likely to provoke retaliatory responses that could exacerbate trade tensions. Experts suggest that this environment continues to dampen market sentiment, contributing to the crypto sell-off and reversing the strategic gains seen just a day earlier.
Despite upcoming announcements for the crypto summit, there is a prevailing negative outlook on the U.S. economy, which is likely to keep downward pressure on cryptocurrency prices. Analysts are increasingly concerned that affected countries may retaliate with tariffs of their own, further influencing the dynamics of the market.
Investors should also note trends in exchange-traded funds (ETFs). On Monday, U.S. spot Bitcoin ETFs reported net outflows of $74.19 million, a sharp decline from net inflows of $94.34 million just a few days earlier. Similarly, spot Ethereum ETFs experienced outflows of $12.1 million, marking their eighth consecutive day of exits.
As the cryptocurrency market adjusts to these developments, it is crucial for investors to remain vigilant, considering both broader economic indicators and specific sector movements that may impact their investment strategies. Keeping a close watch on trade relations and macroeconomic health will be key in navigating the complex landscape ahead.