The cryptocurrency market has been experiencing heightened volatility following US President Donald Trump’s announcement of new trade tariffs on key global partners. While some analysts suggest these policies could drive Bitcoin prices higher in the long run by weakening the US dollar, the immediate impact has been a sharp sell-off across crypto assets. Over the past weekend, the market saw over $1 billion in liquidations as investors reacted to growing concerns over inflation, interest rates, and macroeconomic uncertainty. As the situation unfolds, market participants are closely watching for further developments that could shape the future trajectory of digital assets.
Trump’s Trade Tariffs Could Drive Bitcoin Prices Higher, Despite Immediate Market Shock
US President Donald Trump’s latest round of trade tariffs has sparked intense debates regarding the future of the US dollar and its influence on global markets. According to Jeff Park, head of alpha strategies at financial services firm BitWise, these tariffs may have a significant long-term effect on Bitcoin (BTC) prices, potentially driving them “violently higher.”
Park argues that Trump’s trade policies are engineered to devalue the US dollar in international markets, aiming to correct trade imbalances and make US exports more competitive. This strategy, he asserts, echoes historical precedents, such as the Plaza Accord of 1985—a multilateral agreement between the United States, Japan, West Germany, France, and the UK to weaken the dollar. If a similar scenario unfolds, the resulting economic shifts could bolster Bitcoin’s appeal as a hedge against currency depreciation.
One of the key reasons Park believes Bitcoin will benefit from Trump’s tariffs is the inflationary pressure they may exert on the global economy. As tariffs lead to higher costs for imported goods, inflation could accelerate both in the US and among its major trading partners. The impact will be particularly severe for countries heavily reliant on trade with the United States, as they may face weakened national currencies and a loss of purchasing power.
As the value of fiat currencies erodes, people worldwide may increasingly turn to alternative store-of-value assets, such as Bitcoin, to preserve their wealth. Bitcoin’s decentralized nature and fixed supply make it an attractive option in times of economic uncertainty and inflationary risk.
Park’s theory suggests that a broader shift toward Bitcoin adoption could emerge as investors and citizens seek refuge from fiat currency instability. While gold has traditionally played this role, Bitcoin’s digital nature and ease of transfer make it a compelling modern alternative.
Despite Park’s long-term bullish outlook for Bitcoin, the short-term market reaction to Trump’s tariffs has been anything but positive. Following the announcement of new tariffs on Canada, China, and Mexico, cryptocurrency markets faced a sharp downturn, with Bitcoin shedding approximately 7.2% over the past week.
Data from CoinMarketCap reveals that altcoins bore the brunt of the market selloff. Ethereum (ETH) plummeted by 11.6%, Solana (SOL) suffered a 19.3% decline, and XRP (XRP) dropped by 16.6%. The immediate fear among investors is that escalating trade tensions will lead to a risk-off environment, pushing capital away from speculative assets like cryptocurrencies and into traditional safe-haven assets such as US government securities and gold.
The cryptocurrency downturn aligns with a strengthening US dollar. The US Dollar Currency Index (DXY), which measures the dollar’s performance against other major fiat currencies, has been on an upward trajectory since October 2024. Although the index experienced a slight pullback in January 2025, it has regained momentum in early February, suggesting continued confidence in the greenback despite inflationary risks.
A stronger US dollar poses a challenge for Bitcoin and other risk assets in the short term. Rising US Treasury yields further compound this effect, as investors shift capital from riskier markets into government-backed securities, which offer safer returns in uncertain economic conditions.
Will Bitcoin’s Long-Term Potential Outweigh Short-Term Uncertainty?
While the immediate market reaction suggests bearish sentiment toward Bitcoin, long-term macroeconomic trends could support Park’s thesis. If Trump’s tariffs successfully weaken the US dollar over time, Bitcoin could emerge as a primary beneficiary, attracting investors looking to hedge against currency debasement and inflation.
Historical data suggests that Bitcoin has performed well during periods of economic turmoil and currency devaluation. The asset’s finite supply and decentralized nature provide a level of protection against traditional monetary policies, making it a viable alternative in times of financial instability.
However, traders and investors must navigate the complexities of short-term market volatility. While Bitcoin’s long-term outlook remains promising under Park’s framework, the near-term risk-off environment and a stronger US dollar could lead to further price declines before any sustained upward movement materializes.
Trump’s trade tariffs have introduced new uncertainties into global financial markets, leading to immediate volatility in Bitcoin and the broader cryptocurrency space. While analysts like Jeff Park foresee a scenario in which Bitcoin’s price could rise significantly due to long-term currency debasement, short-term market movements remain unpredictable.
As the US dollar strengthens and investors flock to safer assets, Bitcoin faces headwinds in the immediate term. However, should the anticipated weakening of the dollar materialize in the coming months or years, Bitcoin could see renewed interest as a hedge against economic instability—potentially setting the stage for the next major price surge.
Crypto Market Sees Over $1 Billion in Liquidations Following Trump’s Tariff Announcement
The cryptocurrency market experienced a dramatic sell-off, with over $1 billion in long and short liquidations over the weekend. The market turbulence followed US President Donald Trump’s announcement of impending tariffs on imported goods, a move that triggered widespread risk-asset sell-offs.
According to Coinglass data, more than 450,000 traders were liquidated in 24 hours, amounting to $1.79 billion in total. Long liquidations made up the majority at approximately $1.57 billion, while short liquidations accounted for $219 million.
“The market sell-off was triggered by the White House’s announcement on Saturday that it will impose tariffs on Mexico, Canada, and China,” said Min Jung, a research analyst at Presto Research, in a statement.
Trump’s plan includes a 25% tariff on imported goods from Canada and Mexico and a 10% tariff on Canadian energy and goods from China, set to take effect Tuesday. Canada has already announced a retaliatory 25% counter-tariff, while similar responses are expected from Mexico and China. The escalating trade tensions have led many analysts to describe the situation as an emerging ”trade war.”
“This reignited concerns over inflation, as additional tariffs could further pressure prices, weighing on risk assets, including crypto,” Jung noted. Kronos Research CEO Hank Huang echoed these concerns, stating that investors fear the inflationary impact of these tariffs could force the Federal Reserve to maintain high interest rates for longer than anticipated.
The sharp downturn in crypto prices was exacerbated by liquidations of overleveraged positions. Rachael Lucas, a crypto analyst at BTC Markets, pointed out that the lack of Federal Reserve stimulus and persistently high interest rates have disproportionately impacted altcoins, leading to deeper losses.
Uncertainty Over Trump’s Crypto Stance
The latest downturn also raises questions about the broader market sentiment regarding Trump’s policies. Optimism had initially surged among crypto investors following Trump’s reelection, but as macroeconomic fears mount, that optimism is starting to fade. Analysts note that since his inauguration, the US President has not made any significant statements regarding cryptocurrency policy.
“So far, the major crypto-related headline has been about digital asset stockpiles, with no concrete policy details emerging,” Jung explained.
With Trump’s trade policies still evolving, further volatility in the crypto market is anticipated. BTC Markets’ Lucas suggested that any additional escalation in tariffs or changes in Federal Reserve policy could significantly impact investor sentiment.
As investors navigate these uncertain conditions, the crypto market remains highly sensitive to macroeconomic developments, with traders closely watching both trade policy and Federal Reserve decisions in the coming weeks.
This article was originally Posted on Coinpaper.com
