President Donald Trump's recent announcement of a 100% tariff on foreign-made films has sent ripples through the cryptocurrency market, with Bitcoin experiencing notable volatility. The Administration’s move has raised deep concerns in the market. Others worry that Trump’s populist tariffs are a recipe for rising inflation and retaliation from America’s trading partners. Yet furthering this has been the growing economic uncertainty which is now being more acutely felt in the trading and behavior of crypto assets.
The recent spike in Bitcoin recently shows just how much crypto markets have been warped by larger macroeconomic signals. In April, Bitcoin blasted off on trade war anxiety. It has now done an about face, as hopes that the U.S. will get even tougher on tariffs have ramped up. Continuing geopolitical tensions and economic instability tied to tariffs have spooked crypto markets.
Trump's "America First" Policy and Market Reaction
In April, President Donald Trump instituted tariffs on steel, aluminum, cars and consumer goods. This decision was a central feature of his “America First” economic agenda to restore U.S. manufacturing to its former glory. Yet these policies have contributed to economic uncertainty and fueled volatility that has driven crypto markets.
The Federal Open Market Committee is expected to hold the policy rate steady at 4.25% to 4.50%. They’re trying to resist President Donald Trump’s increasing pressure to lower rates in response to tariffs. This growing chasm between fiscal and monetary policy has added to the anxiety across markets. External policy shocks, especially from the White House, are catching up to exacerbate volatility in crypto markets.
President Donald Trump’s tariffs would set off a chain reaction of retaliatory tariffs from America’s trading partners around the globe. The potential trade war and resulting economic uncertainty has further contributed to the market’s risk-off sentiment, affecting Bitcoin and the crypto market as a whole.
Bitcoin as a High-Beta Macro Asset
According to crypto strategist Lina Zhang, this is because Bitcoin acts like a high-beta macro asset. Its worth varies enormously depending on macroeconomic signals, like tariffs.
"It's acting like a high-beta macro asset right now" - Lina Zhang
This description paints a picture in which Bitcoin’s price fluctuations are more and more tracking with the macroeconomic backdrop and government policy choices. The cryptocurrency, originally viewed as a safe haven outside of traditional finance, broke ranks with it. Today, though, it’s reacting to the same forces that are buffeting stocks, bonds, and commodities.
This changing nature of Bitcoin’s behavior indicates just how far the crypto market has become intertwined with the overall global economy. With institutional investment on the rise and regulatory frameworks slowly evolving, cryptocurrencies are becoming more vulnerable to traditional market forces.
Future Outlook and Market Stability
The lasting effects of President Donald Trump’s tariffs on the crypto market are still unclear. That’s not what we’ve heard at first blush, though. Some analysts are optimistic that in the future Bitcoin will once again be viewed as a hedge against economic uncertainty.
"Once policy stabilizes, Bitcoin could resume its role as a global hedge" - Lina Zhang
How trade disputes are resolved is destined to be a major factor in determining what happens next. Beyond U.S. monetary policy, the overall health of the global economy will be a key consideration as well. Investors need to be prepared for continued volatility within the crypto market. That’s figuring out all the intricacies of a very different economic reality.
