Key market indicators suggest that traders are exercising extreme caution in the crypto markets, as Trump’s tariffs spark widespread bearish sentiment.
The rapidly escalating trade war between the U.S. and most of its major trading partners is striking fear into traders. On Friday, April 4, funding rates on most centralized and decentralized exchanges dropped below the 0.005% threshold, a signal of extreme bearish sentiment.
At the same time, liquidation rates are down 42% over the past 24 hours. While this may seem like good news, it likely indicates that traders are hedging and staying on the sidelines. This aligns with a sharp decline in trading volumes, which dropped by 22.71% in 24 hours to $247.6 billion. Altogether, these figures point to plummeting market activity.
Bitcoin nears death cross on tariff fears
The market is showing other signs of distress. For one, on April 3, the crypto fear and greed index was in “extreme fear” territory, at 25 points. What is more, Bitcoin (BTC), which fell to $81,000 after the announcement, is facing a “death cross,” historically an indicator of high volatility.
Bitcoin’s 50-day moving average is nearing its 200-day moving average, and may soon cross below it. This crossover is generally seen as a bearish indicator, suggesting that traders are bracing for a turbulent period across the crypto markets.
Both crypto and stock market have been in distress since the April 2 announcement of sweeping tariffs on virtually all US trading partners. Donald Trump announced minimal tariffs of 10% on all foreign goods, with larger tariffs on select countries. Namely, China was hit by a 34% tariff.
In response, several countries, including China and the European Union, are preparing retaliatory measures. Traders now fear that this escalating trade conflict could drive up consumer prices, disrupt global supply chains, and spark a recession.
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