The crypto market has just recorded a sudden plunge, dropping 4.5% in the past 24 hours, immediately after President Donald Trump's announcement of new tariffs on many countries.
At the same time, the stock prices of companies related to cryptocurrencies – including publicly listed Bitcoin mining companies – are also deep in the red.
The cryptocurrency market is in free fall.
On July 7, Mr. Trump sent tariff letters to 14 countries, with tariffs ranging from 25% to 40%. South Korea and Japan were the first two countries to receive the letters, followed by 12 other countries including: Tunisia, Kazakhstan, Serbia, Bosnia, Myanmar, Laos, Bangladesh, Malaysia, Cambodia, Thailand, Indonesia, and South Africa.
"According to US Treasury Secretary Scott Bessent, more than 100 countries did not respond to trade agreements after the US tariffs. All these countries will receive tariff letters," The Kobeissi Letter revealed.
In the letter, Mr. Trump expressed concerns about the trade deficit between the US and these countries. He also warned that any retaliatory actions would lead to additional tariff measures.
Economist Peter Schiff criticized this move, arguing that Mr. Trump's approach reflects a misunderstanding of the nature of international trade. Schiff argued that Japan's current tariffs on US goods average less than 2%, while Korea's are below 1%.
"Our trade deficit stems from South Korea and Japan producing more goods that Americans want to buy than the other way around. Trump's 25% tariff will have minimal impact on the trade deficit. Even when the USD weakens, the dollar-denominated deficit may increase because we have to pay more to import fewer goods," Schiff commented.
Mr. Trump's series of tariff letters have immediately negatively impacted the cryptocurrency market. Specifically, the total market capitalization of the entire crypto market has dropped 4.5% in the past 24 hours, with all top 10 major coins plummeting. Bitcoin (BTC) fell 1.56% immediately afterward and dropped below the $108,000 mark, but has stabilized again, currently trading at $108,381. Additionally, Ethereum (ETH) lost nearly 1% and fell to $2,551, while Dogecoin (DOGE) recorded the largest drop of nearly 3%.
Not only cryptocurrencies, but stocks related to crypto have also plummeted. Data from Google Finance shows that shares of Strategy (MSTR) – a company holding a large amount of Bitcoin – have dropped 2%, Robinhood (HOOD) lost 1%, and shares of Bitcoin mining companies fell even more.
Even the US stock market has been severely affected. According to data from CNN, the Dow Jones dropped 422.17 points, the S&P 500 lost 49.37 points, and the NASDAQ fell 188.59 points.
"Like clockwork: every time Mr. Trump sends a tariff letter, the 10-year bond yield goes back to 4.4%. Now, the yield is about 20 basis points higher than during the 90-day tariff suspension announcement. We have reached a stage where budget spending is the key factor driving long-term interest rates. The market has reacted very clearly," The Kobeissi Letter commented.
The current developments are reminiscent of the strong volatility caused by previous trade tensions. In April, the US-China trade conflict caused Bitcoin prices to drop below $80,000, triggering a series of liquidations.
With the new tariffs expected to take effect from August 1, a deeper correction scenario is not surprising. In addition, the likelihood of the Federal Reserve (Fed) cutting interest rates in July is also sharply decreasing, further dampening market sentiment.
According to analysts, the probability of the Fed cutting interest rates in July is now below 5%. The new tariff letters have also significantly reduced expectations for a cut in September. Specifically, the probability of a September rate cut dropped from 90% to 61.9% in just two weeks.
With the simultaneous emergence of adverse factors – Mr. Trump's tariff letter, negative market reactions, along with weakening expectations for an interest rate reversal – the current investment environment is becoming increasingly unstable. Investors are advised to exercise extreme caution in the short term.