The crypto market was in full panic mode on Tuesday as valuations fell double digits almost across the board. To be fair, the move has little to do with crypto itself; values are down because of a feared trade war and waning consumer confidence.

Bitcoin (CRYPTO: BTC) has been the biggest headline maker, falling 8.2% over the past 24 hours as of 11:45 a.m. ET. Ethereum (CRYPTO: ETH) is down 9.2% over that time, and Dogecoin (CRYPTO: DOGE) is off 9.1%. The decline seems to have slowed, but it's not clear if there will be a recovery in trading today.

Crypto is still dependent on the economy

The hard truth being revealed today is that crypto pricing is tied to the economy and highly correlated with the performance of growth stocks. When investors thought the future was going to be much brighter, in fall 2024, the crypto market bounced higher, but the reality is a little less bullish.

We learned today that the consumer confidence index maintained by The Conference Board, a nonprofit think tank, fell from 105.3 in January to 98.3 this month. That's the biggest drop since August 2021, and a reading of 80 indicates a potential recession. A measure of short-term expectations for income, business, and the job market fell 9.3 points to 72.9.

Consumers and investors are worried in part about tariffs on imports from Canada and Mexico, which will evidently start in March after a month-long delay. Reciprocal tariffs, which mirror the tariffs on American goods levied by other countries, are also expected to start as early as April.

The market overall hasn't plunged on the news, but growth stocks are down big.

Crypto's speculative pop is wearing off

The current run in crypto began in November after the election, and while there have been changes to enforcement from the Securities and Exchange Commission, there haven't been the wholesale changes in crypto laws in the U.S. that so many investors expected.

On top of that, the market may be seeing that the value of more blockchain usage may not accrue to native crypto tokens like Bitcoin or Ethereum, and memes like Dogecoin are fading. What's gaining real utility is tokens like stablecoins that can be cheaper and easier to use than traditional financial tools. And if that's where blockchain usage disrupts the financial ecosystem, there will be more pain ahead for many cryptocurrencies.

Where do we go from here?

The momentum that has driven crypto values higher over the past six months is fading, and the U.S. economy seems to be teetering closer to a recession. If that continues, it won't be surprising to see cryptocurrencies continue to fall, especially as a lot of the leverage in the industry is washed out.