Global financial markets, including the cryptocurrency market, reacted instantly to the announcement by the administration of US President Donald Trump of a new package of tariffs against Chinese imports. The S&P 500 and Nasdaq indices went into negative territory, and Bitcoin – the world's most famous cryptocurrency – fell by more than 20 thousand dollars in a few hours. Ethereum, Solana, and other key crypto assets followed suit in a chain reaction, losing 8 to 15% of their capitalization. UNN decided to talk to fintech expert and co-founder of Concord Fintech Solutions, Olena Sosedka, about the reasons for such a dive in the crypto market, and also to find out the forecast for the recovery of digital asset values.
According to analysts' estimates, after the announcement of US tariffs against Chinese imports, a record 19 billion dollars worth of positions were liquidated from the cryptocurrency market. This is the largest one-day fall in the digital market since the Terra-Luna crisis in 2022.
Global economy dictates crypto market trends
Fintech expert Olena Sosedka explains that cryptocurrencies have long ceased to be an isolated world. They are increasingly dependent on the geopolitical situation.
The cryptocurrency market no longer exists in a vacuum. It is already integrated into the global financial market and increasingly reacts to the same factors as traditional assets. If investors expect a slowdown in the global economy due to trade restrictions, they reduce positions in everything that has high risk, including crypto.
According to her, after the announcement of US tariffs against China, the classic "risk-off" effect was triggered. That is, investors exit risky assets, transferring capital to hard currency (dollar, euro, pound sterling, yen), bonds, or gold.
This, in particular, according to her, is one of the reasons for the record rise in gold prices, which was observed until recently.
How the "risk effect" works in crypto
Unlike the stock market, where institutional investors can hedge risks, a significant part of positions in the cryptocurrency market are marginal, i.e., open trades with leverage (a trader can trade an amount exceeding their capital). According to Olena Sosedka, when the value of Bitcoin began to fall, systems automatically closed thousands of such positions, causing a cascade of liquidations. This deepened the fall even further.
This is typical market behavior in a moment of shock. Investors react emotionally - selling assets without waiting for explanations. Therefore, in the first hours after such geopolitical news, such as, for example, tariffs against China, we see the most sharp movements. But such phases are usually short.
Geopolitics + crypto = new reality
The fintech expert says that previously, investors considered crypto as a "safe haven asset" that was independent of global crises. But the last two years have shown the opposite. According to her, the correlation between Bitcoin and Nasdaq exceeds 0.8 - meaning they move in the same direction.
"Trade wars and geopolitical confrontation create not only economic but also psychological uncertainty. When misunderstandings begin between the governments of the two largest economies in the world, investors do not wait for official statements, but flee to the dollar or gold. Crypto is no longer an exception here," said Olena Sosedka.
What's next: instant fright or a new trend?
The fintech expert is convinced that this is a short-term fall caused by an emotional market reaction. According to her, if negotiations between the US and China stabilize, Bitcoin and other coins could recover their positions within a few weeks.
"If you look at the market structure, fundamentally nothing has changed. After all, the technological base, the volume of institutional investments, the bank's interest in blockchain - all this remains. After a period of volatility, the market will return to growth," explained Olena Sosedka.
In her opinion, investors will remain cautious until the end of the year, and a sharp increase in the value of coins should not be expected.
Forecast
According to Olena Sosedka's estimates, in the short term, Bitcoin may consolidate in the range of 110-125 thousand dollars, and Ethereum - around 5.5-6 thousand dollars. The rest of the digital assets will also show growth, as this will be a chain reaction. Gradual recovery, according to the fintech expert, will be observed after the US-China negotiations, if the parties suspend the trade confrontation.