Donald Trump’s tariff policy has rippled in the global markets, with significant implications for both the traditional finance and cryptocurrency industries. The economic landscape is changing as the government adopts measures such as “liberation day” tariffs (no mutual tariffs from several countries that are expected).
Will BTC and cryptocurrency markets take back what people call “future assets”, or just gradually slip in this cycle?
General impact and consequences of tariffs on traditional markets
Overall economic market
Traditional financial markets, including stocks, have fallen, with some of these indexes falling to the levels at the beginning of EBIT in 2023. This reflects the “risky-taking” sentiment of investors supporting higher costs, supply chain disruptions and potential retaliation from trading partners.
Source: Reuters
Economists warn that these tariffs could exacerbate inflation by raising the prices of imported goods, a concern that the United States has already had a massive fiscal deficit. Eliminating billions of dollars in market sell-offs from valuations underscores the immediate stabilization of tariffs on stocks and commodities. For traditional finance, the policy marks a shift in protectionism that could erode global trade norms and thus affect everything from corporate income to consumer prices.
The impact of Trump’s tariffs on currency value
Trump’s tariffs have also stirred up global money markets. Many countries’ currencies are creating value for the U.S. dollar due to huge import taxes imposed by the U.S., such as baseline 10% and reciprocal tariffs. This happens because when the state pays US goods or hubs at higher prices to US suppliers, it enhances the price of the US dollar, thereby enhancing the demand for the US dollar, thereby enhancing the dollar’s strengthening relative to currencies such as the euro or the Japanese yen.
However, USD is not supreme everywhere. In fact, it is weakening the Swiss Franc (CHF). Why? Switzerland’s security is shining during this trade turmoil. Investors flocked, a historically stable currency as tariffs sparked concerns about inflation and global economic uncertainty. The Swiss francs outperform the dollar with a neutral stance and a strong financial system, despite the latter’s efforts elsewhere.
The huge consequences of cryptocurrencies
Short-term fear and massive sell-offs
In the cryptocurrency market, tariffs trigger direct fear and sales pressure. Recently, the fear and greed index of cryptocurrencies ranges from fear to extreme fear, indicating that investors’ minds are unstable.
Source: Binance Square
Bitcoin BTCusually seen as a barometer of crypto sentiment, fell 6% on the day the tariffs were announced. Although BTC’s price rose slightly later, the price fell to $77,000 at the beginning of the week. This reflects the sensitivity of the highest cryptocurrency to macroeconomic news, especially in the looming threat of a trade war.
Typically, cryptocurrencies tend to suffer losses when macroeconomic uncertainty rises, and Trump’s policies expand this dynamic. The outlook for tariff-driven inflation shocked investors, who feared that the Fed’s monetary policy response, such as the ongoing high interest rates, would be more stringent to curb price increases. This has led to fluctuations in price fluctuations, with BTC and other cryptocurrencies experiencing rapid ups and downs. The perception of crypto as a speculative investment, rather than a safer asset like gold, exacerbates these short-term sell-offs.
Market instability is obvious when traders react to each tariff-related title, creating a roller coaster effect that undermines confidence in the industry.
Reduced investment in fear of trade war
Aside from the immediate panic, Trump’s tariffs indicate potential escalation into a broader trade war, further weakening the perception of cryptocurrencies. As global trade tensions increase, investors are increasingly cautious in allocating capital to high-risk assets such as cryptocurrencies.
This caution is reflected in the massive outflow of Bitcoin and Ethereum Exchange Funds (ETFs), which have seen consistent withdrawals since the launch of tariffs. Funds are also discharged from various blockchain ecosystems such as Solana, Ethereum, which can be demonstrated by link activity and declining liquidity.
An imminent trade war could avoid foreign investment, which has historically boosted crypto markets, especially from regions such as Asia and Europe, which are now facing higher U.S. tariffs. The reduced amount of money flowing into cryptocurrencies could hinder the industry, which could remove the excitement of pro-Crypto rhetoric produced by Trump during the campaign.
Digital Gold weakens beliefs – BTC
also, These tariffs could make cryptocurrencies attractive as shields to resist inflation. In the looming trade war, gold and silver prices are rising steadily as they are seen as reliable reserve assets. Bitcoin is often called “digital gold” and has a decline in value. In the midst of chaos, Bitcoin acts more like an adventurous investment and may not protect people from the price increase they hope.
However, this could be a strategic move that countries may exploit in future negotiations besides the United States. As the trade war escalates, countries can use BTC as a negotiating tool, such as alternative assets or cards, put pressure on the United States, and the growing adoption of BTC has also helped countries reduce their dependence on the dollar, i.e., the United States often uses this currency as an economic weapon in trade conflicts.
As the dollar-based financial system weakens, BTC may become an effective negotiation tool for other countries to deal with the United States, and perhaps in the future, BTC will outperform the broader cryptocurrency market and rise independently with gold prices.
Most importantly, Trump’s large economic plans, such as focusing on tariffs and raising U.S. manufacturing, may make cryptocurrency rules unclear.
Even though he talks about cool ideas like strategic crypto protection zones, it could be pushed aside, opening up the cryptocurrency world to randomly suppress or delay the reforms he promised. All of this makes things seem very difficult for cryptocurrencies in the short term of these new policies.
