Bitcoin and Ethereum Drop Amid Tariff Concerns, Outweighing Rate Cut Hopes

Market Reactions to Latest Economic Developments

The price of Bitcoin and other cryptocurrencies fluctuated on Friday as investors processed the White House’s newest tariffs alongside fresh evidence of a weakening U.S. labor market.

Bitcoin and Major Cryptocurrencies’ Performance

Bitcoin was trading around $115,500, reflecting a 2.1% drop within the day, according to CoinGecko. Ethereum saw a decrease of 3.8%, landing at $3,630, while XRP and Solana also experienced losses, trading at $3.05 and $169, respectively.

Stock Market Impacts

In conjunction with these fluctuations in the crypto market, major stock indices also faced declines. The S&P 500 fell by 1.5%, while the tech-heavy Nasdaq dropped 2%. The Dow Jones Industrial Average plummeted by over 570 points, marking a tumultuous day in stock trading.

Details of the New Tariffs

On Thursday night, the Trump administration announced revised tariffs impacting more than 60 countries. An executive order indicated that this new round of tariffs would take effect on August 7 at 12:01 AM, replacing a previously set deadline.

International Trade Implications

Notably, the U.S. increased tariffs on Canadian imports from 25% to 35%, although goods imported under a specific trade agreement with Mexico and Canada will remain exempt. Countries like Brazil face the highest tariffs at 50%. The administration has suggested it remains open to negotiations to manage these trade tensions.

Economic Slowdown Concerns

Previously, concerns regarding U.S. President Donald Trump’s shifting trade policies impacted markets significantly. However, attention lessened as the administration reached 90-day extensions with numerous nations. Now, traders are on high alert as the tariff reprieve established between the U.S. and China is set to expire on August 12. U.S. Treasury Secretary Scott Bessent spoke on CNBC Thursday, remarking that the U.S. might be on track for a trade deal with its largest trading partner following discussions in Stockholm, Sweden.

Jobs Report and Labor Market Analysis

The U.S. economy added only 73,000 jobs in July, maintaining an unemployment rate of 4.2%, as reported by the U.S. Labor Department. Simultaneously, the government revised May and June’s job figures significantly downward, erasing 258,000 jobs. The revised numbers indicated that the U.S. added merely 19,000 and 14,000 jobs in May and June, respectively, rather than the previously reported 144,000 and 147,000, according to Trading Economics.

Federal Reserve’s Monetary Policy Outlook

The recent report suggests that the headline unemployment rate might be concealing issues within the U.S. labor market. This comes just days after Federal Reserve officials opted to keep interest rates steady at a target range of 4.25% to 4.5% for the fifth consecutive meeting. Despite pressure from Trump to lower rates, Fed Chair Jerome Powell clarified that the central bank is not committed to a rate cut in September. Notably, Fed Governors Michelle Bowman and Christopher Waller expressed dissent during this meeting, marking the first instance since 1993 that two members of the Federal Open Market Committee disagreed with the group.

Investor Sentiment and Forward Outlook

Traders increased their predictions for a Federal Reserve rate cut to 78% on Friday, up from 37% a day prior, according to CME FedWatch. Matt Mena, a research analyst at crypto asset manager 21Shares, told Decrypt that the growing certainty regarding rate cuts could have a favorable impact on the crypto market. “As rate cuts are likely on the horizon for the next Fed meeting, liquidity conditions may improve, providing a strong uplift for risk assets like crypto,” he stated. “If a Fed cut becomes almost guaranteed, Bitcoin could rapidly approach $125,000.”