- Cryptocurrency market capitalization has dropped from $3.15 trillion to $2.14 trillion since March 2, erasing $1.01 trillion in value amid bearish trends and investor caution
- Bitcoin fell below $80,000, Ethereum erased post-election rally gains, and most cryptocurrencies saw 10%–25% losses over 30 days, driven by macroeconomic and political factors
- Tariffs, recession fears, and the Federal Reserve’s likely decision to maintain interest rates at 4.25%–4.50% are adding bearish pressure to the already volatile crypto market
While optimistic investors had faith that after a negative month in February—the market would continue to establish its upward trend, the first ten days of March have so far showcased that bears may have more time in the spotlight than expected in 2025.
Since March 2nd, the total cryptocurrency market capitalization fell from $3.15 trillion to the current $2.14 trillion. Overall, effectively $1.01 trillion has left the market since the end of February.
Most cryptocurrencies average 10% to 25% losses over the last 30 days. While Bitcoin has reached below $80,000, Ethereum has completely erased all yields seen after the U.S. Election rally in November of last year.
Given this massive downturn happened only a couple of days after the much-awaited announcement of the Bitcoin Strategic Reserve, the reason why the market turned may seem intriguing.
In truth, there are a handful of reasons why crypto is down, and most of them rely on U.S. politics.
Trump Trade War
President Trump’s aggressive foreign policy could have led investors to become more risk-averse.Â
The U.S. President has gone after its three largest trade partners— Canada, China, and Mexico—renegotiating trade agreements to prioritize American interests, reduce trade deficits, and protect domestic industries.
This approach has led to severe tension between those nations, and of course, retaliatory tariffs coming the United States’ way.
More tariffs on imported goods mean that prices will almost certainly increase for consumers, particularly from products that are dependent on imports like Mexican fuel and agricultural products, Chinese electronics and machinery, and Canadian natural crude oil and natural gas.
With prices increasing, fears of a potential recession are more than likely to scare investors away from cryptocurrency investments, given the heightened risk aversion during economic uncertainty.
Donald Trump himself admits that Americans can expect turbulence in the upcoming months, but believes that in the long run, this strategy will strengthen the U.S. economy by bringing wealth back to the country through tariffs and reshoring production.
Also, the upcoming economic performance is also likely to affect another major metric to evaluate how likely people are to embrace investments.
Interest Rates Cuts Are Unlikely
The next FOMC meeting on March 18-19 will also take into consideration the economic uncertainty surrounding the United States in 2025.
After the 2020-2021 COVID pandemic, the Federal Reserve raised American interests to the highest levels since 2007 in order to try and tame the massive inflationary pressure inherited from the lockdown period.
Risky investments like crypto and stock suffered greatly during that period in 2022, as higher borrowing costs generally mean fewer people are willing to invest in the market. The story began to turn in late 2023, with the FED slowly but surely decreasing interest rates as the American economy recovered.
In the last FOMC meeting on January 29—the first under Trump’s presidency—Fed Chair Jerome Powell interrupted a streak of three consecutive slashes, maintaining a target range of 4.25%–4.50%.
Now, with even more uncertainty in the air, the Federal Reserve is unlikely to return to interest rate cuts, adding even more bearish pressure on the market.
The information provided in this article is for informational and educational purposes only and does not constitute financial, investment, or trading advice. Any actions you take based on the information provided are solely at your own risk. We are not responsible for any financial losses, damages, or consequences resulting from your use of this content. Always conduct your own research and consult a qualified financial advisor before making any investment decisions. Read more
