The crypto market witnessed intense volatility as major tokens like XRP and Dogecoin (DOGE) soared by 20% before reversing their gains. This dramatic price movement came in response to renewed trade tensions between the U.S. and China. The surge was driven by opportunistic traders who capitalized on Monday’s dip, but gains were erased as China retaliated with fresh tariffs on U.S. imports.

U.S.-China Trade War Weighs on Crypto

Former U.S. President Donald Trump’s decision to impose tariffs on imports from Canada, Mexico, and China sent shockwaves through global financial markets, with Bitcoin (BTC) and equities experiencing a steep drop. As tensions escalated, China responded with a 10% tariff on U.S. goods, denting market optimism.

Despite Bitcoin’s growing reputation as “digital gold,” it continues to behave like a risk asset, reacting sharply to macroeconomic uncertainties. Min Jung, a research analyst at Prestro Research, noted that the market’s volatility reflects concerns over the potential long-term impact of a prolonged trade war.

Short-Term Gains, Long-Term Uncertainty

While Monday’s $2.2 billion liquidation event initially presented a “buy-the-dip” opportunity, the market remains in a fragile state. Solana (SOL) and Cardano (ADA) posted modest gains of around 3%, while Bitcoin and Ether (ETH) climbed nearly 4%. However, the sustainability of this rebound remains uncertain.

According to Ben El-Baz, Managing Director of HashKey Global, the U.S.-China trade conflict could dampen investor sentiment, affecting the bullish momentum the crypto industry has enjoyed over the past year. He suggests that pro-crypto policies in the U.S. could mitigate some of the negative effects.

What’s Next for Crypto Markets?

Traders are now closely watching for further developments in the U.S.-China standoff. If the tariffs remain in place or escalate further, the crypto market could see prolonged turbulence. However, if negotiations lead to a resolution—similar to past tariff disputes involving Canada and Mexico—risk assets, including crypto, could stage a strong recovery.

For now, heightened volatility appears inevitable as investors assess whether this trade conflict is a short-term strategy or the beginning of a more prolonged economic battle.