Despite initial market pessimism surrounding the Trump administration’s tariff policies, several bitcoin analysts suggest these economic measures might ultimately benefit crypto in the long run, even as the cryptocurrency has experienced significant price declines in recent months.
Bitcoin’s performance has contradicted investor expectations under the Trump administration. While many anticipated that regulatory reforms and initiatives like a Bitcoin Strategic Reserve would drive prices higher, Bitcoin has instead fallen from peaks above $100,000 to the mid-$80,000 range throughout March.
This downturn stems partly from crypto’s increasing correlation with traditional assets like stocks and bonds, which have been negatively impacted by macroeconomic uncertainty. The implementation of tariffs—additional charges imposed on imported goods—has sparked concerns about a potential global recession, causing investors to retreat from riskier assets, including cryptocurrencies.
Bitcoin As A Safe-Haven?
Many say that market risk appetite could continue to be a factor in bitcoin price action, as deteriorating confidence in global growth prospects could drive a wedge between crypto and traditional safe-havens like gold, with the latter surging to record highs in the past weeks.
As the global financial system becomes more fragmented, investors are increasingly looking for alternatives to both risky assets and dollars. Currently, this has benefited gold, which has appreciated 18% year-to-date. However, Bitcoin could eventually fill this role.
Others argue that crypto remains a risk asset due to its inherent volatility and sensitivity to market sentiment. Still, bitcoin has earned a reputation as “digital gold” and has even drawn support on tariffs uncertainty on several occasions. Economic instability, which could be a result of worsening global trade tensions, could also shore up crypto as a store of value.
Global growth fears, as highlighted by Goldman Sachs recent prediction of higher odds of a US recession, have been priced in though. Some say that the worst may already be behind us and that the work comes in when the US economy benefits from the higher trade levies, possibly triggering market relief later on.
Return To Crypto Fundamentals
After this, the crypto market could soon get back to being driven by fundamentals, particularly if the Trump administration moves on to setting its “strategic crypto reserve” and pursuing more industry-friendly regulation.
On the other hand, risks that tariffs could backfire on the US domestic economy could still elevate bitcoin and crypto assets’ relevance, especially if the dollar winds up shedding its global reserve status.
Sovereign debt standings are already being challenged, particularly with Fitch’s downgrade of China from A+ to A and fiscal troubles rising in the United Kingdom on account of higher gilt yields, possibly throwing the spotlight back on crypto as an alternative store of value as it did in its earlier days.
Worsening trade conditions and weakening global growth prospects could also drive investors towards assets with potentially higher returns or at least more volatile trading conditions, possibly spurring higher volumes for the crypto industry and thereby renewed interest.
Either way, there’s plenty of potential in the space, although a lot hinges on whether or not the regulatory environment continues to be supportive of more crypto industry developments.
