Bitcoin’s Potential Amid Trump’s Trade Policies
Bitcoin (BTC) stands to benefit in the long term regardless of the outcome of President Donald Trump’s trade policies, says Bitwise head of alpha strategies Jeff Park. Here’s why:
Positive Catalyst for Bitcoin
- Successful agreement may lead to a weaker dollar
- Extended trade conflict could result in increased monetary stimulus
- Trump’s economic strategy, including tariffs, could be beneficial for Bitcoin in the long run
Market Response
Over the weekend, Trump introduced 25% tariffs on most imports from Canada and Mexico and 10% tariffs on imports from China. The affected countries retaliated, causing the US dollar to strengthen by more than 1% against major currencies. This led to declines in equity futures and crypto prices, with Bitcoin and Ethereum (ETH) dropping approximately 5% and 17%, respectively.
Bitcoin’s Potential Rise
In crypto markets, low-liquidity weekends and leveraged trading can amplify price swings. The recent selloff triggered a wave of liquidations, with an estimated $10 billion in leveraged positions wiped out over 24 hours. Park’s analysis is rooted in the Triffin Dilemma, which describes the challenges faced by a country that issues the world’s reserve currency.
Trump’s Economic Strategy
- Analysts view tariffs as a tool to bring other countries to the negotiating table
- Potential for a multilateral agreement to weaken the dollar without raising long-term interest rates
- Historical precedent: 1985 Plaza Accord resulted in a coordinated devaluation of the US dollar to support American manufacturing
Potential Impact on Bitcoin
If Trump negotiates a similar agreement, Bitcoin could benefit from lower interest rates, driving risk asset investments. However, a failed negotiation and prolonged tariff war could lead to large-scale monetary stimulus, historically supporting Bitcoin prices. Park believes Bitcoin is well-positioned to rise in either scenario.