cryptonews.net
- Trump's new global tariffs, ranging from 10% to 41%, have sparked market uncertainty, especially for countries like India and Canada.
- The Federal Reserve's decision to maintain interest rates has raised concerns about inflation, causing outflows from cryptocurrencies.
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The crypto market's decline highlights its sensitivity to macroeconomic factors, with Bitcoin and Ethereum falling due to tariffs and Fed policies.
The cryptocurrency market is now struggling to face a severe decline and Bitcoin has fallen below 113,200 driven by other major digital assets including Ethereum, Solana, and XRP.
This decline might be very unexpected to the audience of crypto markets, but it is also the result of a multidimensional sequence of global economic events, with the emergence of new U.S. economic policies being the most significant factor out there and financial panic across markets, in general.
On 1st August 2025, President Donald Trump announced new tariffs on imported goods of different countries that stunned the world markets. The tariffs will likely take hold on August 7, 2025, and are estimated to severely change trade relationships between the U.S. and a range of major trading partners. The various tariffs at a rate of 10 to 41 % will affect a lot of industries, especially those which are dependent on global supply chains. Some of the worst affected countries include India, Taiwan, South Africa, and Canada where tariff on goods shipped by India was increased to 25 % and that of Canada increased to 35% compared to the earlier rate of 25%.
According to Reuters, these tariffs are components of the greater plan of Trump to right the imbalances in trade and shift towards home production. The rhetoric of the former president regarding the tariffs over the years has been to decrease the alleged unfair trade advantages that other countries enjoy. Although the larger aim of such policies is to save the U.S. jobs and industries, in the short run, it creates a tsunami of confusion in the global economy.
U.S. Federal Reserve's Interest Rate
The other major economic factor that has greatly influenced the cryptocurrency market is the move made by the U.S Federal reserve to maintain interest rates during its July 30, 2025 meeting. The move has triggered a lot of controversies with President Trump earlier urging interest rate reduction to be harsh in a bid to make the government debt lighter and also stimulating the economy. Nevertheless, even after Trump repeatedly urged the Fed to lower the rates, the Federal Reserve opted to keep the federal benchmark rate at 4.25% - 4.50%, as it was still worried over inflationary issues and market stability at the time.
The effect of such a decision on the cryptocurrency market has several outcomes. When interest rates increase, investment in other conventional assets such as bonds and stocks tends to be boosted because it is considered to be safe investments. Such a transition is usually accompanied by outflows of capital in less-secure investments including cryptocurrencies. Also, with a stronger U. S dollar driven by the higher rates, cryptocurrencies such as Bitcoin, and Ethereum, usually considered safe as hedges against dollar weakness, are less interesting to overseas investors.
The Federal Reserve has also indicated that it would do anything possible to put the inflation in check by maintaining a low rate. On the other hand, this has made it harder to survive by means of speculative investments such as cryptocurrencies, which have had to survive on low rates. On top of the announcements of further tariffs, this decision concerning the monetary policy has further created confusion in the market, and many traders are not willing to heap bets on the riskier assets.
Crypto’s Immediate Reaction to Tariffs and Fed Decision
The tariff announcement made by Trump in conjunction with interest rate decisions by the Federal Reserve has created an ideal storm of uncertainty in markets. This has led to the decrease of the crypto currency market significantly. The biggest cryptocurrency by market capitalization, Bitcoin, has fallen under 115, 200 INR, and the price was much higher yesterday. Other large-cap cryptocurrencies such as Ethereum and Solana have done the same, and their prices similarly saw steep decreases due to the macro trends.
After Trump announced his tariff, Bitcoin lost 3.82% of its price and the total cryptocurrency market divided by almost $50 billion (Times of India). Solana, Ethereum, and XRP all experienced downtrend, and this explains the linkage between world economic policies and the digital assets market.
The decline is also representative of a larger trend that has occurred over the course of the months-long trade war that was brought about by Trump tariff policy interventions. The crypto market that is usually an alternative to conventional financial assets has been very responsive to these tariff announcements as it causes investors to have a re-balancing of their portfolios depending upon their perception of stability or volatility in the overall states of the global economy. This delicate relationship between crypto and traditional economy is demonstrated by the way the market reacted to these trade policies.
How Crypto Has Reacted to Trump’s Tariffs Over Time
The full-fledged tariff war by Trump started in 2018 when he imposed tariffs on importation of Chinese products. The cryptocurrency market during the time was going through a speculative frenzy but the economic uncertainty posed by the trade war was soon to take its toll on investor psychology. At the outset, most crypto enthusiasts interpreted these events as a springboard to digital currencies to thrive, especially Bitcoin that has always been billed as a guard against fiat instability and inflation.
Nonetheless, the optimism in the market soon was replaced by the fact of trade disruptions, slowdown in economic growth and inflationary pressures. Cryptocurrencies that are fairly price sensitive to macroeconomic news began to shine less in recent times. Nerves among global trade tensions caused investors to withdraw investment into riskier products into more secure financial investments.
By 2023 and early 2024, when Trump went back on the political vibe and started once more lobbying the establishment of more tariffs, the cryptocurrency market had not yet overcome the impact of disruption that had occurred previously. As the trade war rhetoric resurfaced, so were the stagnant crypto prices in which the largest crypto tokens, such as bitcoin, were confronted with severe headwinds despite a perceived bullish atmosphere regarding the technological growth of the crypto system, such as the merge to a proof of stake of Ethereum.
By the middle of 2024, when major world markets have adjusted to the economic consequences of an extended trade conflict, the crypto market still hovered in a lowly condition. Whales, or large investors that own huge quantities of cryptocurrency, started shuffling their portfolios as they felt the threat of the geopolitical situation more and more. This further instability in the crypto markets was majorly affected by the recent tensions in the trade globally and wavings of tariffs.
Although tariffs have never been the sole direct cause of the fluctuations experienced in the crypto market, they do add to a sense of overall uncertainty that has caused falls in valuation of digital assets. Economic pressure brought forth because of the insecurity of global trade wars might be turning away speculative investment, which is a major element of the crypto market behaviour.
The announcement by the Federal Reserve to maintain interest rates also plays a part in enhancing the overall negative mood. Cryptocurrencies that have tended to be seen as high risk but high reward investments cease to be appealing due to heightened interest rates because investors will be rushing towards secure assets that guarantee returns. The combination of this pressure of the Fed together with tariffs has formed an ideal storm that has seen cryptocurrencies being left reeling to gain their presence once again.
In case the tariffs lead to the further emergence of economic strain and inflation expenses, investors can proceed to shun digital assets further in disfavour of the more traditional and secure classes of investments. Moreover, should the Federal Reserve remain cautious in its approach to higher interest rates, this may further extend the battle of the market to revert back to its bullish economy.