The crypto market experienced extreme volatility following former President Donald Trump’s announcement of a U.S. Crypto Strategic Reserve, initially driving Bitcoin, Ethereum, and other major tokens higher. However, gains were short-lived as skepticism over implementation and regulatory approval led to sharp corrections. All the gains Bitcoin (BTC) and crypto made one day before were washed out entirely as the world's largest digital currency (BTC) struggled to find support even at $82,000 -- a straight fall from last day’s high i.e. $95,000, causing more than 1 billion dollars worth of liquidations as ETH and other crypto are falling sharply as well.

Major cryptocurrencies like BTC (-9.75%), Ethereum (11.71%), Tether (-0.01%), XRP (-11.90%), Solana (-16.47%), Cardano (-18.29%), Dogecoin (-12.95%) are all bleeding. Some of them, including Cardano, XRP and Solana, had jumped 60%, 33% and 22% on Monday.

Here are the key factors why the overall crypto market is down.

Top 6 Tokens Down

A day after experiencing a strong rally, the top six largest tokens by market cap plunged 20% in the past 24 hours, which has wiped out around $2.8 billion from their overall crypto market cap, according to the data from crypto.news. The crash has left a dent on the overall market, with the Kobeissi Letter data showing a decline of around $100 billion since Trump announced the formation of a new crypto reserve.

Tariffs Against China, Canada

US President Donald Trump has proposed tariffs against China, which has intensified economic uncertainty, leading a broader market sell-off in the digital currency space. The Trump administration has also imposed 25% tariff on Canadian imports and a 10% tariff on the Canadian energy sector. All these factors have negatively impacted the crypto as well as equity markets.

Market Skepticism

Several doubts have been cast about the feasibility of Trump's strategic crypto reserve. Anthony Pompliano, founder and chief executive officer at Professional Capital Management (PCM), and one of the biggest crypto investors, also released a letter on Monday, criticising the move, saying it's an "unforced error" that will be regretted in the future. Notably, PCM has its largest crypto investment in Solana. "We were promised a Strategic Bitcoin Reserve, not a smattering of altcoins. I will benefit financially from the proposed structure and I still think it is a bad idea."

He even questioned Trump and his team's intention. "Is the President and his team intentionally tanking the market? Will the Fed raise their inflation target to 3% because they can't get inflation under control?," he asked.

Crypto Fund Outflows

Ongoing crypto fund outflows is another factor weighing on prices, reflecting cautious investor sentiment. "While the idea of a government-backed crypto reserve stirred optimism, market reactions highlighted the sector’s sensitivity to policy shifts and the need for clearer regulatory frameworks," says Avinash Shekhar, Co-Founder & CEO, Pi42.

This is not the only market, which is acting brutally towards its investors. "With Trump confirming tariffs on China and Mexico to be started by March 4th caused S&P 500 to crash by more than 2% in point in the day," says a commentary by CoinSwitch Markets Desk.

Trump's Crypto Reserve

Trump on Sunday announced a strategic "Crypto Reserve" to position the country as the "Crypto Capital of the World." He said the reserve would include five cryptocurrencies, namely, Bitcoin, Ethereum, XRP, Solana, and Cardano. “A U.S. Crypto Reserve will elevate this critical industry after years of corrupt attacks by the Biden Administration, which is why my Executive Order on Digital Assets directed the Presidential Working Group to move forward on a Crypto Strategic Reserve that includes XRP, SOL, and ADA."

Soon after the announcement, Cardano, Solana and XRP surged as much as 60%, and Bitcoin and Ethereum jumped by more than 10% each.