Crypto market crash deepens as investors digest Trump tariff threat

Key takeaway:

• Rising US and Japan bond yields signal macroeconomic stress, dragging the total crypto market capitalization 32% below its Oct 2025 peak.

Bitcoin (BTC) and Ether (ETH) retested their lowest levels in more than two weeks after crypto and stock markets digested US President Donald Trump’s fresh round of tariff threats. The potential tariffs are an attempt by the administration to convince Denmark to reconsider its control of Greenland. European nations have shown little willingness to negotiate, prompting crypto and equities investors to adopt a more risk-averse stance. 

The S&P 500 index fell 1.9%, while gold prices surged to a new all-time high on Tuesday. The total cryptocurrency market capitalization dropped to $2.71 trillion on Tuesday, down from nearly $3 trillion the previous Wednesday.

Yields on the 5-year US Treasury climbed to their highest level in almost six months, a move often linked to fears of recession or rising inflation. Investors demanded higher returns to hold US government debt, signaling weakening confidence.

Billionaire investor and hedge fund manager Ray Dalio told CNBC that a “new phase of global financial conflict” may be emerging as foreign governments reassess their exposure to US assets amid growing uncertainty and economic strain. Dalio noted that history provides several examples where economic disputes expanded beyond trade into capital flows.

In the past, Dalio has raised concerns about declining confidence in the US dollar. While this backdrop could appear favorable to those who view cryptocurrencies as an alternative monetary system, silver has been the standout performer so far, rising 64% since December. The precious metal’s market capitalization has climbed to $5.3 trillion.

European Commission President Ursula von der Leyen warned on Tuesday that any response to US threats would be “unflinching, united, and proportional,” increasing fears of negative spillovers into equity markets.

Corporate market cap values catch up to Bitcoin

Bitcoin ranked as the eighth-largest global tradable asset with a market capitalization of $1.8 trillion, but competitors such as TSMC (TSMC US) and Saudi Aramco (2222 SR) are rapidly closing the gap. Ether’s position appears more fragile, with a $360 billion market capitalization, placing it 42nd overall after being overtaken by Home Depot (HD US) and Netflix (NFLX). The total cryptocurrency market capitalization is down 32% from its all-time high reached in October 2025.

Investor attention has shifted toward macroeconomic risks as the world’s largest central banks face mounting pressure from higher debt issuance costs. Japan, the world’s fourth-largest economy, is expected to hold a snap election that could grant Prime Minister Sanae Takaichi a mandate to accelerate stimulus measures, according to the Financial Times. Japan’s public debt already exceeds 200% of gross domestic product.

Related: Bitcoin institutional demand remains strong–CryptoQuant

Yields on Japan’s 20-year government bonds surged to record highs on Tuesday. According to a TD Securities report, the move in Japan has spilt over into the US, the United Kingdom, Canada and other markets, serving as “a warning sign to heavily indebted nations that bond markets can turn rapidly if fiscal policy loses credibility.”

These contagion risks are particularly concerning amid heightened geopolitical tensions, leaving the cryptocurrency market exposed. For now, Bitcoin’s chances of reclaiming $95,000 and Ether (ETH) revisiting $3,300 largely depend on whether President Donald Trump can reach some form of agreement with European heads of state during meetings scheduled for this week.