Bitcoin Slides as US-China Trade War Escalation Rattles Markets

(Bloomberg) -- Bitcoin and other digital assets faced renewed selling pressure as trade tensions between the world’s two largest economies intensified, with the US and China imposing fresh tariffs on each other.

The largest cryptocurrency fell as much as 3.6% to $98,199, while other major tokens including Ether and Solana also lost ground. 

China retaliated to Washington imposing a 10% levy effective on all Chinese goods by announcing fresh tariffs that go into effect on Feb. 10 on certain products imported from the US, including oil and liquefied natural gas. China also said it will investigate US tech giant Google LLC for alleged antitrust violations. 

The renewed market turbulence erased gains from Monday’s relief rally, which came after a temporary agreement by the Trump administration to delay tariffs on Mexico and Canada by a month. Cryptocurrencies had fallen sharply when the levies were first announced over the weekend. 

Escalating trade tensions have dealt a blow to investor confidence in risky assets. US investors pulled a net $235 million from a group of 12 Bitcoin-focused exchange-traded funds on Monday. Open interest in Bitcoin futures contracts on CME Group Inc.’s derivatives exchange also fell 4%, signaling a more cautious approach among institutional investors.

President Donald Trump, who is avowedly pro-crypto, has also introduced fresh uncertainty for digital-asset markets. While cryptocurrencies initially surged following Trump’s election, they are now struggling amid a challenging year marked by geopolitical and regulatory headwinds.

Bitcoin was trading at $99,600 as of 7:37 a.m. on Tuesday in New York, about 10% away from its record high.

US exchange-traded funds investing in Ether saw record trading volumes on Monday as leveraged positions in the digital asset unwound sharply, rattled by ongoing trade tensions under Trump.    

Led by BlackRock’s iShares Ethereum Trust, which captured nearly half of the market activity, the group of nine ETFs registered $1.5 billion in trading volume. Ether, the second-largest cryptocurrency by market value, plunged as much as 27% on Monday, triggering liquidations totaling more than $600 million in perpetual futures markets, according to data compiled by Bloomberg.  

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