Crypto market hits ‘extreme fear' zone: Trump tariffs, US economy slowdown trigger market volatility

Arabian Business

27-02-2025

Cryptocurrency investors could be in for a roller-coaster ride ahead with the crypto market hitting the 'extreme fear' zone on concerns that the perceived exceptionalism of the US economy may be waning, while President Donald Trump moves forward with tariff plans, market experts said.
Beyond trade tensions, the crypto markets are also facing uncertainty over a potential US economic slowdown, exacerbated after a raft of weak readings on consumer sentiment, experts said.
The Crypto Fear & Greed Index, which quantifies market sentiment on a scale of 100, dropped to 25 on Wednesday, February 26, according to Coinglass data.
President Trump's announcement on Monday about his intention to impose a 25 per cent tariff on imports from Canada and Mexico starting in early March heightened market unease, market experts said.
Ryan Lee, Chief Analyst at Bitget Research, said the sharp decline signals a shift toward 'extreme fear', suggesting that market participants may be reacting to broader economic pressures or anticipating further downturns.
Shivam Thakral, CEO of BuyUcoin, India's second-longest-running digital asset exchange, said as Bitcoin experiences a notable decline of over 12 per cent from its recent peak, retail investors find themselves at a crossroads.
'The current market conditions are marked by volatility, driven by macroeconomic factors and regulatory uncertainties,' Thakral told Arabian Business.
Bitcoin, trading at $85,137 in the morning hours on Thursday, recovered a bit after hitting a low of $84,376 in the last 24 hours – a sharp fall of over 15 per cent from the $100,000 after Trump's presidential takeover.
The flagship cryptocurrency's price is projected to hit a low of $81,000 or even below in the near term.
Trade tensions impact crypto
Sector experts said the crypto market's shift into 'extreme fear' reflects escalating concerns over potential US trade wars.
Besides the flagship cryptocurrency Bitcoin, altcoins also declined further as investors retreated from risk assets.
Lee said sustained trade tensions could push Bitcoin toward critical support levels at $81,000 or below, particularly if inflation fears or economic slowdowns intensify.
Global investors are jittery amid concerns that the perceived exceptionalism of the US economy may be waning, while President Trump moves forward with tariff plans.
Ilman Shazhaev, CEO of Dizzaract, the Dubai-headquartered crypto and blockchain venture, said the current market upheaval, coming close on the heels of the recent scare created by the $1.5 billion Ether hack on Bybit, make investors more jittery.
'The sentiment in the market now is beyond the Bybit hack,' he said.
Thakral said the cryptocurrency landscape is increasingly becoming unpredictable, and what might seem like a favourable entry point today could shift rapidly.
Extreme fear, potential gains
Even as the crypto market hits the 'extreme fear' zone, a section of the experts sees the current plunge in bitcoin and other digital currency prices could be a potential buying opportunity for investors.
Lee said two countervailing factors may emerge from the current market upheaval. Firstly, prolonged tariffs could amplify Bitcoin's appeal if inflationary pressures rise, and secondly, Trump's pro-crypto agenda and regulatory initiatives might stabilise market sentiment once short-term risks ease.
'The $3–5 billion in leveraged liquidations suggests market corrections may eliminate overleveraged positions, potentially creating a rebound opportunity if trade tensions de-escalate,' Lee said.
He, however, said for now, crypto remains tightly correlated with macroeconomic uncertainty, balancing bearish trade risks against structural bullish drivers like institutional adoption.
Amit Malik, President – JAPA (Japan, Asia Pacific, and Australia) at WadzPay, a blockchain-based financial services company, said though Bitcoin's current dip presents a potential opportunity for retail investors, investors must exercise extreme caution.
'Historically, buying the dip has proven profitable for fundamentally strong cryptos like Bitcoin and Ethereum, which tend to rebound after corrections. However, before investing, investors should assess Bitcoin's long-term value and monitor market sentiment,' Malik told Arabian Business.
Malik also suggested investors must think about adding various cryptocurrencies to diversify their portfolios.
'However, be aware that prices could fall further due to volatility, regulatory changes, or macroeconomic events. Base your decisions on thorough research, not impulse,' he cautioned.
Thakral said while some may view this dip as a potential buying opportunity, investors must conduct thorough research and assess their risk tolerance before making any decisions.
'Ultimately, the choice to invest should align with individual financial goals and market understanding rather than emotional reactions to short-term price movements,' he said.