The cryptocurrency market experienced a significant downturn on March 4, with major digital assets such as Bitcoin, Ethereum, XRP, and Solana all suffering substantial losses. Bitcoin (BTC) dropped nearly 10%, reaching $83,738, while Ethereum (ETH) plummeted 15% to $2,076. XRP fell by 18%, and Solana saw a sharp 20% decline. In just one day, the market lost almost $250 billion in value.
A Chain Reaction of Sell-offs
The sharp decline was triggered by massive sell-offs, leading to a wave of liquidations. In just 24 hours, more than $1 billion in cryptocurrency was wiped out, according to data from Coinglass. Bitcoin alone saw $396.16 million in liquidations, with Ethereum following closely behind at $209.58 million. Even meme coins like Dogecoin (DOGE), Shiba Inu (SHIB), and Pepe Coin (PEPE) were not immune, losing 15%, 13%, and 18% respectively.
Initial Optimism Reversed by Tariff Announcements
The crypto market had shown signs of optimism earlier in the week when former President Donald Trump unveiled the U.S. Crypto Strategic Reserve on March 3, suggesting that the government would hold Bitcoin and Ethereum. This announcement initially pushed crypto prices up by 4.41%, sparking positive sentiment. However, this optimism proved short-lived as doubts emerged regarding the plan’s implementation, leading to widespread sell-offs.
The real catalyst for the crash came with Trump’s announcement of new tariffs. The U.S. raised taxes on Chinese goods from 10% to 20% and imposed a 25% tariff on imports from Mexico and Canada. In retaliation, China imposed its own tariffs ranging from 10% to 15% on U.S. goods. These developments stoked fears of a trade war, prompting investors to move away from riskier assets like cryptocurrencies.
Key Factors Behind the Crypto Crash
The market’s sudden decline can be attributed to three key factors:
Massive Liquidations – A wave of sell-offs triggered widespread liquidations.
Short-Lived Optimism Over Trump’s Crypto Reserve – Skepticism over the plan’s viability led to a quick reversal of gains.
Failure to Break Resistance Levels – The market was unable to surpass key resistance levels, resulting in a correction.
Avinash Shekhar, CEO of Pi42, noted, “The crypto market saw extreme volatility following Trump’s announcement of a U.S. Crypto Strategic Reserve. However, doubts over its execution and regulatory hurdles caused a sharp market correction.”
Stock Market Impact and Investor Sentiment
The broader financial markets also took a hit, with the S&P 500 losing $1.5 trillion in value. Investor sentiment has plummeted, as evidenced by the Fear and Greed Index, which dropped from 33 (Fear) to 15 (Extreme Fear) overnight. This sharp decline marks a stark contrast from just a month ago, when the index was at 60 (Greed).
Looking Ahead: Key Events on the Horizon
All eyes are now on two significant events. On March 7, Trump will host a White House Crypto Summit, which could offer much-needed regulatory clarity. Additionally, the potential approval of new spot ETFs for XRP, Cardano, Dogecoin, and other assets could impact the market. Until these events unfold, the crypto market remains volatile, and investors are closely monitoring developments.
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