Preface

On February 24th, President Trump announced that a 25% tariff would be imposed on Canada and Mexico starting March 4th, and plans to double the current 10% tariff on Chinese imports. This has raised concerns among investors about the global trade tension, leading to capital flowing into safe-haven assets such as the US dollar. As a result, the crypto market has suffered a significant sell-off, causing the price of Bitcoin to temporarily fall below the $80,000 mark and break through the 200-day moving average, with a weekly decline of 16%. At the same time, other cryptocurrencies such as XRP and Solana also experienced a significant downturn. This report will analyze the reasons for the recent overall market decline, discuss how the market environment triggers chain reactions, and its impact on the prices of crypto assets.

The United States will impose tariffs on Mexico and Canada starting March 4, 2025 (Image source:https://www.instagram.com/groundnews/p/DFjCSI5MsIh/）

Macro reasons analysis

On February 27th, President Trump reiterated on his social account: “Drugs are pouring into the United States from Mexico and Canada in unacceptable amounts. Therefore, the proposed tariffs on Mexico and Canada, originally scheduled to take effect on March 4th, will be implemented as planned until the influx of drugs is contained or strictly controlled.” He also added that the U.S. will impose a 25% “equivalent” tariff on imported cars and other goods from Europe. These series of measures not only exacerbate the global trade tensions but also have various negative impacts on the crypto market.

First, the market typically views a large-scale tariff increase as a signal of escalating global trade friction, which may lead to supply chain disruptions and further drag on global economic growth. Against a backdrop of rising uncertainty, investors’ risk appetite decreases, tending to reduce holdings of high-risk assets and turn to traditional safe-haven assets such as the US dollar, gold, and US treasuries, directly affecting the outflow of short-term funds from high-volatility markets such as the crypto market.

Contrary to the bearish trend in the crypto market, the US dollar exchange rate has been fluctuating and rebounding recently (Image source:https://www.moomoo.com/hans/stock/USDCNH-FX）

Secondly, tariff increases usually boost demand for the US dollar, further suppressing the performance of the crypto market. When the US dollar strengthens, it is generally believed that holding cash or assets priced in US dollars carries lower risk, and funds are more inclined to flow into US dollar assets. At the same time, importers need to purchase more US dollars to pay for additional import costs, while exporters (especially major trading partners of the United States) may reduce their holdings of US dollar assets. Since the price of cryptocurrencies has a long-term negative correlation with the US Dollar Index (DXY), the appreciation of the US dollar inadvertently increases the downward pressure on crypto assets.

Finally, tariff increases may tighten market liquidity, increase investor uncertainty, prompt traditional financial market investors to adjust asset allocation, reduce exposure to high-risk assets such as cryptocurrencies, and prompt large institutional investors to optimize investment strategies and reduce cryptocurrency holdings in response to macroeconomic changes. This trend may continue until the macroeconomic environment stabilizes and market sentiment improves.

Overall on-chain data

Fear Greed Index

As of the latest statistics at 21:00 on February 28th, the Fear & Greed Index is currently at 16, indicating an “extreme fear” state, showing that investor confidence is low, which may continue to put pressure on the prices of mainstream cryptocurrencies in the short term. However, extreme fear periods are usually a sign of market bottoming out or an impending correction, putting the market in an oversold state, prompting some investors to seek opportunities for low position layout.

2025/02/28 Fear and Greed Index (Source:https://www.gate.io/zh/bigdata）

Market clearing trend

From the liquidation heat map, it can be seen that the current market is generally in a liquidation-led downward trend, with mainstream encryption assets and most altcoins experiencing significant sell-offs. Bitcoin and Ethereum have liquidation volumes of $1.12 million and $0.9057 million respectively, showing high selling pressure from market investors on core assets. Solana also faces large-scale liquidation, reaching $0.4286 million, further exacerbating the downward pressure on prices.

It can be speculated that the market sentiment has entered the extremely pessimistic area, with strong risk aversion, investors tending to reduce their holdings of risk assets. In addition, large-scale leverage liquidation may cause further short-term market volatility, until the liquidation pressure is released, the market may only recover stability.

Latest liquidation statistics across the entire network (Image source:https://www.coinglass.com/LiquidationData)

Long/Short Ratio in Futures

Recently (February 24th - February 26th), the trend of the BTC long/short ratio is similar to ETH. The market sentiment of mainstream currencies has rebounded in the past few days and then quickly fell back, showing that market confidence is still fragile. Investors are more inclined to short-term trading rather than long-term holding.

Investors in the future need to pay attention to the flow of funds, macroeconomic factors (such as the Federal Reserve’s policy, market liquidity), and the overall trading volume of the crypto market to judge whether the market will see a new trend breakthrough. If the long/short ratio breaks through 1.05 and continues to rise, the bullish sentiment warms up, and the market is expected to stabilize and rebound; if the long/short ratio falls below 0.90, the market may enter a deeper correction period, and the bears will further expand their dominant position.

Latest BTC and ETH contract long/short ratio analysis (Chart Source:https://www.coinglass.com/LongShortRatio）

Trend of mainstream currencies

In the past week, both Bitcoin and Ethereum have experienced double-digit declines, with ETH performing more weakly, and the overall market still in a state of fear. The major declines in mainstream currencies occurred from February 22nd to February 25th, with Bitcoin’s price dropping below $90,000 in a short period of time, and then continuing to decline, indicating significant selling pressure in the market; ETH’s price rapidly fell from $2,700+ to below $2,400 and then entered a period of consolidation and oscillation.

As of February 25, 2025, when this article was written, the latest token price for $BTC is $84202.78, and the latest token price for $ETH is $2226.53. The future price trend still needs to pay attention to market liquidity, changes in the US dollar index, and macro policy impacts.

Price trends of mainstream currencies during 02/21 - 02/28 (Image source:https://www.blockchain.com/explorer/prices)

Future trend prediction

AI predicts that BTC prices will further decline from March to April, with a target range between $70,000 and $80,000, possibly dropping to around $65,000. The confidence interval indicates that even if there is a possibility of a rebound, the overall market trend remains bearish, and it may be difficult for BTC to return to the $100,000 threshold in the future. Similarly, the price of ETH will continue to decline from March to April, expected to fall to the range of $1,500-$2,000. If the macroeconomic environment continues to deteriorate (such as the Fed’s interest rate hikes, global economic slowdown), the price of ETH may drop below $1,500, entering a deeper adjustment period.

Overall, in the short term, both BTC and ETH prices will continue to be under pressure. The crypto market will need a longer period of consolidation. In this trend, institutional investors may reduce the allocation of risk assets, further suppressing the upward space of BTC and ETH. The long-term trend still needs to observe macroeconomic policies, such as the Fed’s interest rate policy, the recovery of market demand, to judge when the market will usher in new growth momentum.

Mainstream currency price trends Ai model prediction (Image source:https://cryptopriceperdiction-isshiliu.streamlit.app/）

Conclusion

Currently, the overall crypto market is still in a phase of adjustment, with macroeconomic uncertainty, a strong US dollar, and a market clearing frenzy exerting continuous pressure on the prices of BTC and ETH. The market may undergo a longer consolidation period under this background. In this context, investors need to closely monitor global economic dynamics, institutional fund flows, market trading volume, and key support levels to judge whether there are signs of market stabilization. In the long run, the market is still expected to recover, but it is necessary to wait for an improvement in the macro environment. Investors should allocate assets reasonably and develop a sound risk management strategy to cope with future market fluctuations.