Market analysis by Inky Cho, Financial Markets Strategist at Exness If you hold a certain amount of Bitcoin or whether you’re planning to buy some soon, you must be wondering what impact the US tariffs have on the coveted crypto’s price. Undoubtedly, the return of President Donald Trump to the White House arguably marks the most schismatic moment in US politics and geopolitics. Trump’s reappointment was followed by a deluge of draconic measures, including eerie promises of mass deportations and a series of controversial decisions emanating from Elon Musk, the head of the Department of Government Efficiency (DOGE), has been keeping traders and investors on a string. The pledge to impose 25% tariffs on imports from Canada and Mexico, and 20% on imported goods from China in his first 100 days in office, made Trump one of the most controversial political figures of the 21st century. But “tariffs” is not the only “most beautiful word in the English dictionary,” according to the US President. The word “cryptocurrency” also carries particular significance, as he promised to enact a series of deregulation measures aimed at bolstering Bitcoin and altcoins’ value. To that end, he signed an executive order that serves as the foundation for a so-called “Strategic Bitcoin Reserve” and a “Digital Asset Stockpile,” which will include Bitcoin alongside other cryptocurrencies. The funds will be held with digital currencies forfeited to the federal government as part of legal proceedings. According to David Sacks, the White House AI and crypto “czar,” this reserve will be “a digital Fort Knox for the cryptocurrency,” which he likened to the Kentucky military base that stores a significant amount of US gold assets. Amid a wave of polarizing reaction from crypto enthusiasts, some of whom criticized the government for not taking a bolder stance, while others questioned the transparency of the process. Sacks has reportedly ordered a full account of the government’s crypto asset reserves, which he estimated at 200,000 Bitcoin alone. But is that enough to turn Bitcoin into a hedge? The answer to this question is more complex. A tariff-led Bitcoin bull run in disguise The President’s relationship with the crypto space is not entirely free of any conflict of interest. The launch of his name meme-coins $TRUMP and $MELANIA just before inauguration day spited the industry, which through the voice of Danny Scott, CEO of CoinCorner, retorted, “Trump’s comments about not knowing much about the coin back up my opinion that he is making a mockery of the industry. It’s a stunt.” Against this hazy background, the US tariffs cast a somewhat more positive light on the potential of Bitcoin and other crypto assets. Assuming that Donald Trump completes his tariffs’ mandate, immigration policies, and tax cuts, inflation could rise rapidly. However, this type of inflation will not be a positive sign at all. For example, the cost of German motor vehicles in the US would soar, rushing Americans to open their wallets before the tariffs are enforced. This upsurge in consumer spending could temporarily drive retail sales higher, creating an artificial sense of economic growth. The early signs of this were seen in December 2024, when the consumer price index (CPI) rose at an annual rate of 2.9%, backed by a lower core inflation. Cryptocurrencies, which unlike safe-haven gold, have a growth component that makes them inherently more sensitive to economic shifts such as inflation spikes and tariffs. And Bitcoin is no exception. Driven up by 2% as the US CPI data sent mixed inflation signals across markets, Bitcoin surged $1,500 to $98,000 in 24 hours in December 2024. Because of its nature, many investors and traders consider Bitcoin a commodity. From this perspective, it’s worth exploring the effect of the recently vehiculated US tariffs on Bitcoin and the broader crypto market. Near-term fears and the rush for cash Near-term, tariffs may hurt Bitcoin’s and the crypto market’s performance, precisely because of its inherent growth-driven characteristic. This is evident in its recent price action. As fear pervades the financial markets, Bitcoin hit a 4-month low amid massive crypto market sell-off. The crypto market reached a staggering $1 billion in liquidations in the space of 24 hours (between March 10 and March 11), making many traders run for their money. Bitcoin and Ethereum, the largest cryptocurrencies by market capitalization, have been the biggest losers of this downturn. The main reason behind this mind-blowing price drop is the large movement of cryptocurrency by key players. Mt. Gox, the not-long-ago dominant crypto exchange, transferred tens of thousands of Bitcoin as it settles debts, triggering sell-off fears. In a chain reaction, an Ethereum whale, who’s been laying low for months, deposited a jaw-dropping amount of ETH into Kraken, adding to the jittery. Another key ETH holder sold a significant portion of its holdings at a loss, potentially to prevent forced liquidation. Had this not been enough already, Donald Trump’s comments of a looming recession sent shockwaves through the stock and crypto markets. Stock prices and crypto valuations took a tumble as a result, erasing the gains added after the latest US monetary policy update. Bitcoin also tumbled to a multi-month low briefly amid fears that an impending sharp decline may be ahead, before recovering slightly. Traders must tread with caution and exercise risk management using Stop Loss as the downward trend may continue unless buying pressure returns. This is a typical reaction to political and economic uncertainty triggered by Trump’s tariff policy. But is this all there is to Bitcoin’s path ahead or is there light at the end of the tunnel? The bigger picture: Bitcoin as a US tariff hedge Maintaining its correlation with the NASDAQ at a 40% rate, Bitcoin is currently trading way below its 72% peak correlation point. Nevertheless, as seen during March 2023, when the banking crisis climaxed, Bitcoin can uncouple and act as a safe-haven asset. This is arguably its paradox, as it can be both highly volatile and a safe haven. In this context, Bitcoin, unlike Ethereum and other altcoins, can be seen more as digital gold. This polarity across the crypto market is likely to continue, analysts suggest, with Bitcoin acting more like a hedge against economic uncertainty and present-day US tariffs, while altcoins, including Ethereum, remain tied to the tech sector and implicitly, tech-heavy NASDAQ. Food for thought Tariffs shape economies as new trade alliances could be formed and trade wars likely to erupt in various parts of the world. In the short term, US tariffs could lead to higher inflation, slower growth, and volatility in Bitcoin and risky assets. In the long term, however, Bitcoin’s role as a hedge against tariffs could increase, especially if tariffs trigger economic instability. What lies ahead for Bitcoin remains to be seen. Meanwhile, traders will do well to keep abreast of US policy decisions as well as global economic and political developments. This will help them make informed decisions and potentially even enjoy some of Bitcoin’s potential as a hedge.