While campaigning for the presidency in 2024, Donald Trump promised to become the “crypto president.” But since he began his second term in January, cryptocurrency values have crashed.
Bitcoin (CRYPTO: BTC) saw its price fall from over $100,000 on Inauguration Day to $81,000 as of this writing. It’s worth pointing out that broader financial markets have declined as well, with the S&P 500 down about 12% since President Trump took office.
But the current sell-off could be an opportunity for cryptocurrency investors, particularly those interested in Bitcoin. That’s because the policies Trump has put in place could ultimately benefit Bitcoin, the largest, most widely used crypto. In particular, two recent policies could support the next bull run in Bitcoin.
On March 3, President Trump announced the United States would establish a strategic cryptocurrency reserve including Bitcoin, Ethereum, XRP, Solana, and Cardano. The aim of the reserve was to make the U.S. the “Crypto Capital of the World,” Trump said.
The reserve will only hold assets forfeited as part of criminal or civil proceedings. It won’t buy or sell any cryptocurrency on the foreign market. Investors who were hoping for the U.S. to become a big buyer of cryptocurrencies were disappointed at the announcement.
But the crypto reserve could play a very important role in the next bull run for Bitcoin and other crypto assets. It practically endorses them as legitimate assets that can store value.
That opens the door for more institutional investors to adopt Bitcoin for their and their clients’ portfolios, as the U.S.-endorsed asset now seems far less risky. Growing institutional adoption is going to be the biggest driver of value for Bitcoin over the coming years. Bitcoin’s price goes up when demand exceeds supply. Institutional investors, and their hundreds of trillions of dollars of assets, represent a lot of potential demand.
There’s an important relationship between the U.S. dollar and the value of Bitcoin. When the dollar weakens, investors seek out alternative assets, such as cryptocurrency.
Theoretically, a tariff on imports would raise the relative value of the U.S. dollar. If demand for foreign goods falls, countries relying on exports to the U.S. will see their currency weaken relative to the dollar to maximize demand and supply.
However, Trump’s massive tariffs, the highest we’ve seen in 115 years, have had the opposite effect. Since announcing broad tariffs on April 2, the U.S. Dollar Index has fallen about 1.8% as of this writing. If you go all the way back to Trump’s tariff announcement against Canada and Mexico in January, the index is down roughly 5.5%.
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