For a brief moment after President Donald Trump announced his tariffs, it looked as if Bitcoin (CRYPTO: BTC) could keep its head as markets all around it were losing theirs. The stock market plummeted on April 3 and April 4, as investors and businesses digested the impact of President Donald Trump’s tariffs (which have since been put on hold for three months).
Bitcoin dropped just over 1.5% while the S&P 500 lost more than 10% in those two days. It is a rare day when crypto is less volatile than stocks. But Bitcoin did stumble in the following days.
Let’s zoom out and look at how tariffs, should they be imposed, could affect Bitcoin.
The full impact of tariffs on the economy and the U.S. dollar remains unclear. Bitcoin bulls argue this is its chance to shine.
A trade war could lead to higher inflation and a weaker U.S. dollar. Some experts believe this could eventually be good for Bitcoin. As Zach Pandl, head of research at Grayscale, told CoinDesk, “I think tariffs will weaken the dominant role of the dollar and create space for competitors including Bitcoin.”
Some people think Bitcoin has potential as a form of digital gold — a safe asset against inflation. Like gold, Bitcoin isn’t controlled by any government, and only a finite amount of Bitcoin will ever be produced. So far, Bitcoin’s resilience has been non-existent. For example, Bitcoin crashed in 2022 as inflation hit a 40-year high. Cryptocurrencies behave more like tech stocks than gold, and some see Bitcoin as too volatile to act as an inflation hedge.
However, we are now in uncharted territory. Not only is a planned 125% levy on Chinese imports unprecedented, but Bitcoin is also more established and accessible than in the 2018 U.S.-China trade war. This makes it more attractive for investors looking to diversify.
Tariff impacts could also be offset by other, pro-crypto policies. The administration responsible for tariffs has also made several crypto-friendly moves. These include:
The formation of a Strategic Bitcoin Reserve and digital asset stockpile
Nominating Paul Atkins — a crypto advocate — to become Securities and Exchange Commission chairman
Appointing David Sacks as White House artificial intelligence (AI) and crypto czar
On the other side, a global recession would have a big negative impact on Bitcoin’s price, particularly in the near term. As recession fears grow, crypto prices are feeling the pressure.
Bitcoin tends to struggle when investors get nervous. Bitcoin stumbled on recession expectations in 2018 and again in 2022. Business leaders like BlackRock’s Larry Fink and JPMorgan Chase’s Jamie Dimon are already warning of an economic slowdown. It is hard to overstate the potential impact of recession, inflation, and falling consumer confidence on Bitcoin’s price.
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