Global markets have dropped to their lowest levels in six weeks on persistent fears of a trade war. In this situation, crypto markets are in a vulnerable position, especially altcoins like Ethereum and XRP, including Dogecoin. However, a subsequent stock market recovery also boosted these tokens.
On Tuesday, March 4th, the S&P 500 index lost 19.14 points, falling to the lowest level since January. Fears over a renewed trade war between the US and China triggered the decline, as traders reassessed risk. At the same time, crypto markets fell 10.74%, with many tokens posting double-digit losses.
Following the decline, a subsequent stock market recovery in after-hour trading has also boosted crypto. For instance, after reaching a low of $1,996.77, Ethereum recovered to $2,168.21. XRP fell from its weekly high of $2.95 to a low of $2.23 before stabilizing at $2.49. Dogecoin touched a low of $0.1837 before recovering to $0.2001.
Still, the latest developments around US trade relations suggest that there may be more pain ahead. US President Donald Trump is not backing off his planned tariffs against Canada, Mexico, and China, among other countries. Among these, Canada already retaliated with tariffs on US goods, and Prime Minister Justin Trudeau called the trade war “a very dumb thing”.
What’s Next for Ethereum, XRP, and Dogecoin
The high volatility of these tokens highlights their persistent interconnection between traditional markets and crypto. For instance, Bitcoin declined to $81,529 before recovering to $88,647. Despite the narrative that Bitcoin is counter-cyclical, meaning that it rises when stocks fall.
In this environment, the crypto market faces an increased risk of another stock market fall. Notably, the S&P 500 index is indicating several bearish signals, falling below its 100-day exponential moving averages. The charts also show that the index fell below the long-term narrowing wedge, indicating further price drops.
The prevailing view among investors is that stock markets will continue to impact the crypto markets. This is especially important for altcoins, which are much more volatile than both stocks and Bitcoin. When a risk-off sentiment prevails in the markets, crypto assets like these will fall the hardest.
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