Crypto Sells Off Alongside Broader Markets as Trump Reignites Trade War Fears

Cryptocurrency markets tumbled Tuesday alongside a broader selloff in U.S. equities as President Trump's renewed tariff threats against Europe sparked concerns of an escalating trade war.

Bitcoin fell below $88,000 during the session before recovering to $89,752 as of press time. The total cryptocurrency market capitalization declined 2.34% over 24 hours to $3.03 trillion. Ethereum dropped 4.78% to $3,000, while Solana fell 2.3% to $128.36, per Coinmarketcap data.

The crypto decline mirrored losses across traditional markets. The S&P 500 dropped 2%, the Nasdaq Composite retreated 2.4%, and the Dow Jones Industrial Average sank 1.8%, erasing year-to-date gains for the major indexes in the worst trading session since October.

Trump over the weekend threatened eight NATO countries with 10% import duties unless they agreed to a deal on Greenland, the Danish territory he has sought to acquire. On Monday, he proposed a 200% tariff on French wine after President Emmanuel Macron declined to join his "Board of Peace." The European Union has discussed $108 billion in retaliatory tariffs and could deploy an "anti-coercion instrument" potentially affecting $8 trillion in U.S. assets.

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Crypto markets sell off alongside risk assets as European trade war fears intensify

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The trade tensions drove investors into traditional safe havens. Gold and silver rallied to fresh record highs, while crypto assets traded as high-beta risk instruments, underperforming defensive assets. Treasury yields jumped to four-month highs as a selloff in Japanese bonds added pressure on U.S. debt.

The sharp moves highlight crypto's continued fragility during macro volatility. Despite the sector's maturation and growing institutional participation, digital assets remain tightly correlated with equity risk appetite. Bitcoin and major altcoins are trading in tight ranges, signaling defensive positioning as traders await clearer catalysts.

Institutional inflows or signals of Federal Reserve rate cuts could provide support for crypto prices. Until then, markets appear stuck in a low-volatility holding pattern as participants monitor Trump's meetings with European leaders at the World Economic Forum in Davos this week. The president is scheduled to deliver his keynote address later today.