The recent downturn in the cryptocurrency market can be attributed to several key factors:
1. Global Trade Tensions: On February 2, 2025, U.S. President Donald Trump announced the imposition of 25% tariffs on imports from Mexico and Canada, and 10% on goods from China, effective February 4. In response, these countries vowed to retaliate, escalating concerns over a potential global trade war. This uncertainty has led investors to move away from riskier assets, including cryptocurrencies.
2. Broader Market Sell-Off: The announcement of new tariffs has triggered a broader market sell-off, affecting stocks, bonds, real estate, and precious metals. This widespread decline has also impacted the cryptocurrency market, as investors seek safer assets amid the economic uncertainty.
3. Regulatory Developments: India is reassessing its cryptocurrency stance due to evolving global perspectives, particularly influenced by recent crypto-friendly policy announcements in the United States under President Trump. This reevaluation may delay the release of a discussion paper on cryptocurrencies initially scheduled for September 2024, adding to the regulatory uncertainty affecting the market.
4. Market Manipulation and Fraudulent Activities: The emergence of fraudulent token schemes, such as unauthorized DeepSeek-branded tokens, has contributed to heightened volatility and shaken investor confidence. These fraudulent activities have led to significant market fluctuations, further contributing to the downturn.
These factors, among others, have collectively contributed to the recent decline in cryptocurrency prices.