Bitcoin Senses Risk as Trump Proposes Major Tariffs on Europe

US President Donald Trump's recent announcement about imposing punitive tariffs on several European allies has stirred uncertainty in the markets. This significant move has prompted traders and policymakers to react swiftly.

Key Takeaways

Trump's proposed tariffs could impact goods from several European nations, leading to market volatility.
Bitcoin dropped by roughly 3%, trading around $90,000.
A wave of liquidations on crypto platforms intensified the downward pressure on prices.
European governments reacted strongly, warning of potential countermeasures.
Traders and institutions adjusted their strategies amid the unfolding situation, leading to temporary market distortions.

Bitcoin

Following Trump's tariff plan, both stock and cryptocurrency markets witnessed declines as investors sought out safer assets. Gold prices surged, and some currencies appreciated in value amidst the growing risk.

Market Response to Tariffs

Markets reacted swiftly to the news. Bitcoin saw a decrease of nearly 3%, trading in the lower $90,000 range, while stock futures weakened. Investors flocked to traditional safe-haven assets, resulting in gains for precious metals and a stronger performance for specific currencies.

Market analysts reported significant liquidations on cryptocurrency platforms, estimating around $750 million to $875 million of leveraged long positions were closed during the first wave of selling. This added considerable downward pressure on prices and created heightened volatility for several hours following the announcement.

BTCUSD Chart
BTCUSD trading at $92,970. Chart: TradingView

Details of the Tariff Proposal

Trump indicated that an additional 10% tariff would begin on February 1, 2026, on goods from eight nations that opposed his stance on Greenland, with the rate set to increase to 25% by June if diplomatic negotiations do not progress. The countries impacted encompass Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and the UK.

Europe's governments responded firmly, signaling potential retaliatory actions. Officials in Brussels hinted at possible measures that could negatively affect US exporters if tensions escalate. Trade policy is now once again in the spotlight, intersecting various political lines.

“We don’t always agree with the US government, and in this case, we certainly don’t. These tariffs will hurt us." - Nigel Farage MP (@Nigel_Farage)

The rapid reaction from crypto traders also reflected the market dynamics. Many positions built using margin were quickly adjusted or closed. While some traders decided to lessen their exposure to volatile currencies, others seized the opportunity to buy at lower prices, believing these market shocks would be temporary.

In short intervals, Bitcoin appeared to behave more like a risk asset, aligning with stock market trends rather than acting as a stable store of value. However, some analysts contend that lasting policy shocks raising inflation expectations could increase demand for scarce resources. This perspective depends on how various economic factors unfold.

During the periods of heightened volatility, market makers tightened spreads, leading to thinner liquidity pools. Consequently, large orders took longer to match, and price fluctuations became more pronounced. Some institutional trading desks temporarily halted activities to reassess risk models while retail traders actively monitored charts and alerts.

A few hedge funds leveraged this opportunity to realign their portfolios towards commodities. Others engaged in scenario planning to anticipate how retaliatory tariffs or sanctions might influence specific sectors.

Featured image from Unsplash, chart from TradingView