Smaller cryptocurrencies fall more than bitcoin after Trump's tariff surprise

By Frances YueSmaller cryptocurrencies have been falling harder than bitcoin after President Donald Trump on Wednesday announced his latest tariff plans - which were much more severe than expected - as investors scaled back riskier investments in the digital-asset space.Bitcoin (BTCUSD) traded at around $82,312 Thursday, down roughly 1.4% over the past seven days, according to the Dow Jones Market Data. It was roughly 25% below its record high of $109,225 reached on Jan. 20, Trump's Inauguration Day.While bitcoin is highly volatile, it is often seen as a "blue-chip" investment within the crypto space, as the token has the largest market capitalization and the strongest liquidity among all crypto assets.Meanwhile, smaller tokens fell even further, with ether (ETHUSD) declining 10.4% over the past seven days. The ether/bitcoin ratio dropped to a four-year low at around 0.02 on Thursday, after the ratio fell over 56% in the past year.Solana (SOLUSD) declined 16.3% over the past seven days, XRP (XRPUSD) lost 12.4% and cardano (ADAUSD) pulled back 12.6% over the same stretch.As a result, bitcoin's dominance - or the coin's market cap relative to the total crypto market - reached as high as 63% on Thursday, the highest level since Feb 3."I think you just still have the bid in the market for bitcoin, where you don't necessarily have that same strength behind some of the altcoins," Max Bareiss, head of lending at Galaxy, said in a phone interview. Altcoins tend to outperform bitcoin in a bull market and underperform bitcoin in a bear market.What's more, the market structure for bitcoin has fundamentally changed since ETFs investing directly in the asset were launched last year - with demand coming from retirement accounts, macro funds and the companies such as MicroStrategy Inc. (MSTR), according to Eric Chen, co-founder at Injective Labs.While ether ETFs were also launched last year, they haven't seen as much demand as their bitcoin counterparts. U.S. regulators to date have only approved ETFs that invest directly in bitcoin or ether.Adding to the pressure for smaller cryptocurrencies is that some investors who trade such tokens may also trade equities in highly leveraged accounts, according to Peter Eberle, chief investment officer at crypto investment firm Castle Funds."As the stock market crashes, these investors face margin calls, putting them in a difficult situation and forcing them to scale back their bets across all asset classes," Eberle said in emailed comments.U.S. stocks ended sharply lower on Thursday, as the Dow Jones Industrial Average DJIA fell 1,679 points, or 4%, to 40,545. The S&P 500 SPX ended 4.8% lower and the Nasdaq Composite COMP lost 6%.-Frances YueThis content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.