Why Trump's Tariffs Could Actually Be Good for Bitcoin

So far, the crypto market has not performed as expected under the Trump administration. Investors hope that regulatory reforms and policies like the Bitcoin Strategic Reserve will drive prices up significantly. But the reality is quite the opposite. Bitcoin has fallen from a high of over $100,000 at the beginning of the year to a low in the mid-$80,000s for most of March. The price of cryptocurrencies has been affected by an increasing correlation with traditional assets such as stocks and bonds, which are influenced by macroeconomic instability. Tariffs — additional charges that the United States applies to imports from other countries — have raised concerns on Wall Street about a global economic recession. Cryptocurrency investors have steered clear of cryptocurrencies, which are considered relatively risky. Marc Ostwald, Chief Economist & Global Strategist at ADM Investor Services International, said: “It is all due to the market’s ‘risk appetite’ continuing to deteriorate and currently creating a distinction between crypto assets and gold, which remains the chosen ‘safe haven’.” “[That] is largely driven by the foreign exchange reserve managers of the central bank, who are looking to minimize the risks associated with the USD, which has long been a concern for them.” As the global financial and trade systems become more fragmented, investors are seeking alternatives to riskier assets, including the dollar. Currently, that means turning to gold, which has increased by 18% to date. But that could change, according to Omid Malekan, a visiting professor at Columbia Business School and author of “The Story of Blockchain: A Beginner’s Guide to the Technology No One Understands.” Bitcoin may soon become the new gold. “I think the whole [future] is uncertain and in some ways unpredictable, because there are many reverse flows and both crypto and tariffs are new. Some people argue that cryptocurrency is just a risky tech asset and will be liquidated due to tariffs. But Bitcoin has found its place in some circles as ‘digital gold’ and that kind of material is soaring when news of tariffs comes out. So what will it be?” In other words, economic instability may lead investors to turn to Bitcoin just as they have sought gold in recent months. Another positive note: the impact of tariffs on cryptocurrencies may be “priced in” and the worst may be over, Zach Pandl, head of research at Grayscale, a leading cryptocurrency asset management firm, said. President Trump is expected to announce the United States’ tariff levels on Wednesday, April 2, at 4 PM Eastern Daylight Time—a day referred to as “Liberation Day.” According to reports, he will impose “reciprocal tariffs” on 15 countries that have placed tariffs on the United States, including China, Canada, and Mexico. Pandl estimates that tariffs have taken away 2% of economic growth so far this year. But Liberation Day could actually prevent the worst pain in the financial markets. Pandl told CoinDesk that “If we see an announcement [on Wednesday] that is tough but phased and focuses on the 15 countries they seem to be targeting, I expect the market to rally after that news.” “It is likely that when we get past this announcement, the crypto market may refocus on very positive fundamentals.” Pandl stated that announcements like Circle’s IPO will not happen if institutions do not have a high level of trust in the digital asset space and the policies surrounding this field. Moreover, Pandl, a former macroeconomic expert at Goldman Sachs, believes that tariffs will increase the demand for non-dollar currencies. “I think tariffs will weaken the dominance of the dollar and create space for competitors including Bitcoin. Prices have fallen in the short term. But the first few months of the Trump administration have raised my long-term confidence in Bitcoin as a global currency asset.” Pendl still believes that Bitcoin will reach new all-time highs this year, despite the current pessimism about prices. “I wouldn’t have left my job on Wall Street if I didn’t think Bitcoin would be the long-term winner,” he said.