Preface

The introduction of a new round of tariffs by U.S. President Donald Trump has led to increased caution among market analysts, particularly concerning cryptocurrencies like Ethereum's ether (ETH). This economic maneuver is expected to inject a level of uncertainty into the market, especially regarding assets considered high-risk.

Lazy bag

U.S. President Trump's 25% tariffs on steel and aluminum spark concerns of economic volatility, influencing crypto market sentiments negatively, especially affecting Ethereum.

Main Body

The U.S. President, Donald Trump, has announced the introduction of 25% tariffs on all steel and aluminum imports into the United States. These tariffs are part of a broader strategy to reform trade practices and are expected to be implemented reciprocally with other countries later in the week. This aggressive trade policy has been accompanied by a spike in inflation expectations, a factor that typically leads to economic volatility. Particularly at risk are high-risk investments, which include cryptocurrencies.

Market experts have noted that crypto majors like Bitcoin and Ethereum have shown limited reaction in the immediate aftermath, moving minimally in European markets with Bitcoin, Ether, XRP, Solana's SOL, and Dogecoin each gaining less than 1% in the 24 hours following the announcement. However, some isolated weaker performances, such as BNB Chain's BNB declining by 4.5% post-rally, were noted.

These tariffs escalate trade war fears, potentially affecting global markets by creating volatility and driving investors towards more stable investments. As a result, cryptocurrencies often see reduced interest. For Ethereum's ether, the situation could worsen, given the already unstable sentiment surrounding cryptocurrencies and recent unfavorable performance indicators, such as a declining Bitcoin-Ether ratio which suggests a preference shift from ETH to BTC.

The implications of a further decline in ETH prices extend beyond the token itself. They could unfavorably affect associated investments like meme coin Dogecoin and Ethereum-based decentralized finance (DeFi) tokens, which typically follow movements of ether due to their ties to the Ethereum network. Augustine Fan, head of insights at SignalPlus, highlights a bleak perspective via a Telegram message, suggesting that Ethereum is currently witnessing record short-interest levels and a year-to-date decline, while Bitcoin shows slight gains.

Market analysts, like Nick Ruck from LVRG Research, argue that Ethereum has already suffered significant price reversals since late November last year, wiping out previous gains and diminishing its appeal as an investment vehicle amidst rising inflation expectations. Investors now anticipate only a single interest rate cut by the Federal Reserve this year, resulting in continued skepticism towards riskier assets, including cryptocurrencies.

Additionally, QCP Capital, a trading firm based in Singapore, expects the crypto market to remain unstable until there is clarity on President Trump's ongoing economic interventions. The firm's Monday broadcast message indicates that the feedback loop of Trump's actions and market reactions could potentially increase volatility, as the President may choose to intensify his efforts in response to market challenges. They observe that currently, Bitcoin options lean towards protective puts, reflecting market participants' lack of confidence in immediate price surges.

Key Insights Table