Bitcoin risks correction below $90K on US-China trade war concerns
2025-02-04
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Bitcoin risks a deeper correction as fears of a potential global trade war escalated following import tariffs announced by US President Donald Trump and China’s Ministry of Finance.
The Ministry of Finance of the People’s Republic of China announced new import tariffs of up to 15% on some US imports effective Feb. 10, according to official documents published on Feb. 4.
China’s decision came in response to Trump’s Feb. 1 executive order imposing import tariffs on goods from China, Canada and Mexico.
After a brief recovery, Bitcoin's BTCUSD price fell below the $100,000 mark on Feb. 4, pressured by growing fears of a potential trade war ignited by Trump’s tariffs.
Despite finding its daily bottom and reversing from $96,200, Bitcoin’s price risks a correction below $90,000 on growing global trade and inflationary concerns.
Ryan Lee, chief analyst at Bitget Research, said China’s tariff decision could introduce additional volatility to risk assets such as Bitcoin.
“Escalating tensions may weaken traditional markets, prompting investors to seek Bitcoin as a hedge against inflation and currency devaluation. However, a broader market sell-off driven by economic uncertainty could also trigger short-term corrections, potentially pushing Bitcoin below $90,000,” Lee told Cointelegraph.
Bitcoin risks short-term correction due to traditional market volatility
Historically, large economies introducing import tariffs have caused “significant market drawdowns” according to James Wo, the founder and CEO of venture capital firm DFG:
“However, a sustained trade war might also accelerate the dollar debasement while pushing up inflation to drive global demand for alternatives instead of US dollar-denominated assets,” Wo said.
Meanwhile, Bitcoin needs to remain above $97,000 to avoid more downside volatility.
A potential correction below $97,000 would trigger over $1.3 billion worth of cumulative leveraged long liquidations across all exchanges, CoinGlass data shows.
Bitcoin and risk assets may face downward pressure if the tariffs strengthen the US dollar and attract more capital inflows, Lee said.
“The key factor will be monetary policy — if the Fed responds with lower interest rates to counteract economic stress, increased liquidity could provide momentum for Bitcoin’s price,” he added.
Moreover, Lee said higher tariffs may fuel inflation concerns and supply chain issues, which could lead investors to increasingly view Bitcoin as a hedge against traditional market volatility.
Market participants now await Trump’s upcoming discussions with Chinese President Xi Jinping, aimed at resolving trade tensions and avoiding a full-scale trade war, which may have significant implications for global markets.
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