The new tariffs announced by the ‘US government have already sent shockwaves through the global markets and the crypto space. Jeff Park, Head of Alpha Strategies at Bitwise Asset Management, shares his thoughts on how this will impact Bitcoin’s future. Based on available reports, many industry leaders are left wondering what could imminently be the aftermath of these new developments.
Tariffs and the US Dollar: Immediate Market Reactions
According to news sources, The US has imposed 25% tariffs on Mexico and Canada and 10% on China to rebalance trade by making US exports cheaper. Park said this is exactly like the Plaza Accord in 1985, where the major economies agreed to intervene jointly to devalue the US dollar to correct the trade imbalance.
He believes that tariffs are a way to devalue the dollar in international trade, inflation could rise and investors will turn to alternative assets like Bitcoin.
In the short term, this has resulted in a drop in cryptocurrency prices. Bitcoin fell below $100,000 yet again, marking a three-week low. Other cryptocurrencies also took big hits; Ether dropped 5%, Solana 6% and XRP 4%. Investors are worried this trade war will add to inflation, and with economic uncertainty rising, they will flee to safety.
US Dollar Strength and What It Means
The ‘US Dollar Currency Index (DXY); which measures the dollar against other currencies, has been going up since October 2024. After a small pullback in January, available data shows that the dollar rose again in early February. Analysts say a stronger dollar and rising US government bond yields could pose risks for Bitcoin and other risk assets as investors might favor government bonds’ safety.
Long Term: Bitcoin’s Next Rally
Despite the short-term sell-off, Park is bullish overall. He thinks and still argues that US trading partners might have more inflationary pressures from the tariffs and could lead to the devaluation of their currency. As a result, at that point, people could look for alternative stores of value and may turn to Bitcoin.
Park emphasizes that this scenario represents his “highest conviction macro trade for the year,” anticipating that Bitcoin prices could rise “violently higher” over time.
Following the reports from News.com.au, giving expert insights, Financial commentator Robert Kiyosaki has also commented and weighed in on the situation, saying the market turmoil is due to an impending economic downturn. He advises investors to consider buying assets at lower prices. Additionally, some experts advise holding long-term despite the current volatility and not panicking.
Conclusion
The new tariffs from the US have brought both short-term challenges and long-term opportunities to the crypto market. While this is negative short term, analysts like Jeff Park says this might actually help make the case for Bitcoin as a store of value in an uncertain economic world.
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Disclaimer: This article is informational and should not be regarded as investment advice. All predictions come from an analysis of the current market and may change any moment. Always research and consult a financial expert before making any investment decisions.
FAQs
1. How have Trump’s tariffs affected Bitcoin in the short term?
The announcement of new tariffs has led to a decline in Bitcoin’s price, with the cryptocurrency falling below $100,000, marking a three-week low
2. What will happen to Bitcoin long term after the tariffs?
Analysts like Jeff Park say the short-term is bad, but long-term can be good. A weaker US dollar and inflation may make people look at Bitcoin as a better store of value.
3. How will tariffs affect the US dollar?
Based on reports, tariffs could weaken the US dollar by making US exports more competitive and balancing trade. That’s what happened in the 1985 Plaza Accord when the major economies got together to devalue the dollar.
4. What are investors doing now?
Officials say some investors are getting risk averse, moving out of crypto and into safer assets due to inflation and economic uncertainty.
5. Is this a buying opportunity?
Some financial experts think so, they say you can buy Bitcoin on a discount with a long-term view on the market recovery
References
- New Trump tariffs stoke inflation fears, trigger $2 billion in crypto liquidations, Bitcoin crashes to $92K.Crypto Briefing, 3 Feb. 2025.
- Bitcoin slides below $100,000 as tariffs rattle markets. Reuters, 2 Feb. 2025.
- Watch These Bitcoin Levels as Price Drops on Concerns About Impact of Tariffs. Investopedia, 3 Feb. 2025.
- Brutal crash: Panic as crypto plummets. News.com.au, 3 Feb. 2025.
