Why Trump's tariff policy may be good for Bitcoin?

With the Trump administration unveiling tariffs on Wednesday, many are pessimistic about the overall economy and cryptocurrency prices. However, analysts say there are good reasons to be optimistic.

Crypto markets have performed much differently than expected during the Trump administration so far. Investors had hoped that regulatory changes and policies such as the Bitcoin Strategic Reserve would significantly boost prices, but the opposite has happened. Bitcoin prices peaked well above $100,000 at the start of the year but have fallen to a low of around $85,000 for much of March.

Crypto prices have been weighed down by increased correlations with traditional assets such as stocks and bonds, which are suffering from macroeconomic uncertainty. Tariffs - additional fees imposed by the United States on imports from other countries - have Wall Street worried about a global recession. Crypto investors are moving away from crypto assets because they are seen as relatively riskier.

"It all has to do with the market's 'risk appetite', which is currently deteriorating, which has temporarily created a split between crypto assets and gold. Gold continues to be the 'safe haven' of choice," said Marc Ostwald, chief economist and global strategist at ADM International Investor Services.

“This is largely driven by central bank reserve managers who are trying to reduce their exposure to the dollar, which has long been a concern for them.”

As the global financial and trading system becomes increasingly fragmented, investors are looking for less risky alternatives to assets, including the dollar. For now, that means turning to gold, which has risen 18% so far this year.

But that could change, and Omid Malekan, an adjunct professor at Columbia Business School and author of The Story of Blockchain: A Beginner’s Guide to the Technology No One Understands, says Bitcoin could soon become the new gold.

“I think the whole future is uncertain and in some ways unpredictable because there are so many cross-cutting factors, and both cryptocurrencies and tariffs are new territory. Some people think cryptocurrencies are just a risk-on tech asset that will be sold off because of tariffs. But Bitcoin is seen in some circles as ‘digital gold,’ and physical gold is rising rapidly on the tariff news. So which one will it be?”

In other words, economic uncertainty could prompt investors to turn to Bitcoin just as they have sought gold in recent months.

Another positive sign: The impact of tariffs on cryptocurrencies may already be “priced in,” and the worst may be over, said Zach Pandl, head of research at Grayscale, a leading crypto asset manager.

President Trump is expected to make an announcement on U.S. tariffs at 4 p.m. ET on Wednesday, April 2, known as “Liberation Day.” He will reportedly unveil “reciprocal tariffs” against 15 countries that have imposed tariffs on the U.S., including China, Canada and Mexico.

Pandl estimates that tariffs have already reduced economic growth by 2% this year. But “Liberation Day” may be able to ease the worst of the pain felt by financial markets. “If we see a tough but phased announcement on Wednesday that focuses on the 15 countries they seem to be targeting, I would expect the market to rebound on that news,” Pandl said in an interview with CoinDesk.

“Once we get past this announcement, the crypto market will likely refocus on fundamentals, which are very positive.”

Pandl noted that announcements like Circle’s IPO won’t happen unless institutions are confident in the digital asset space and the policies surrounding it.

Additionally, Pandl, a former macroeconomist at Goldman Sachs, believes that tariffs will increase demand for non-dollar currencies.

"I think tariffs will weaken the dominance of the dollar, creating space for competitors, including Bitcoin. Prices have fallen in the short term. But the first few months of the Trump administration have further strengthened my long-term belief in Bitcoin as a global monetary asset."

Despite the current market pessimism about prices, Pandl still believes that Bitcoin will hit new all-time highs this year. "I wouldn't have quit my Wall Street job if I didn't think Bitcoin would be a long-term winner," he said.