On July 5, 2025, global cryptocurrency markets saw a sharp 3.9% drop in total value to $3.4 trillion, driven by a broad sell‑off following President Trump’s signing of a major tax and spending bill at a July Fourth ceremony.
Traders and investors reacted to the legislation’s impact on taxes, health coverage and immigration funding, triggering a pullback in digital asset prices.
Market Overview
According to CoinGecko data, the total market cap fell to $3,408,104,440,042. Trading volume over the past 24 hours reached $73,568,968,926. Bitcoin traded at $108,035, down 0.8% in the same period.
Among trending coins, TRON slipped 1.6% to $0.2832, while Sui held steady at $2.92. Smaller tokens saw rapid moves, with Tharwa up 65.8% to $0.007753, BabyBoomToken rising 50.3% to $0.6531, and International Meme Token gaining 48.6% to $0.9485.
Impact of the Tax and Spending Bill
On July 4, in an outdoor event that resembled a political rally, President Trump signed into law a sweeping package of tax cuts and spending measures. Military jets roared overhead as hundreds of supporters cheered.
The bill makes his 2017 tax cuts permanent, funds new immigration enforcement, and is expected to drop millions of Americans off health insurance. It passed the House by a narrow 218‑214 vote after an emotional debate.
Why Crypto Reacted?
The passage of this bill has several implications for digital asset markets. First, the permanent tax cuts could reduce the appeal of high‑risk investments by lowering the need for tax‑driven capital gains strategies.
Second, cuts to health coverage may drive some investors to shore up liquid assets, including crypto, amid fears of rising personal costs.
Finally, increased government spending on enforcement may unsettle markets by signalling tighter regulation ahead. Together, these factors prompted investors to sell off positions during the holiday, causing a 3.9% pullback.
Investor Sentiment and Volatility
Short‑term traders saw opportunities in high‑volatility tokens. Tharwa’s 65.8% surge and similar jumps in meme coins reflect a flight to speculative assets for quick gains.
Meanwhile, major cryptocurrencies saw more modest moves, suggesting that institutional and long‑term holders remained cautious. The 14% drop in daily trading volume indicates many users opted to step back, perhaps waiting for regulatory clarity or a technical rebound.
Long‑Term Outlook
While the bill’s immediate effect was a price dip, analysts point out that crypto markets often recover quickly after political events. The fixed supply of Bitcoin and the growing adoption of blockchain solutions could anchor long‑term value.
However, if the government leverages its new funding to impose stricter oversight, the sector may face higher compliance costs. Investors will watch closely for signals on potential digital asset regulations in the coming weeks.
What This Means?
The holiday sell‑off shows how sensitive cryptocurrencies have become to US fiscal policy. As digital assets mature, they respond not only to blockchain developments but also to broader economic and political trends.
For average users, this means that market swings may accelerate around major government actions. Those holding crypto should be ready for periods of heightened volatility, especially when significant legislation is passed.