Abstract
Recently, former US President Donald Trump reiterated his policy plan to impose high tariffs on Canada, Mexico, and China, triggering a severe shock in the global financial market. As a result, the stock market, foreign exchange market, and cryptocurrency market all experienced significant volatility, with the price of Bitcoin (BTC) briefly falling below $92,000. Although the market has been impacted in the short term, the trade war and high tariff policies may actually benefit decentralized assets like Bitcoin in the long run.
This report will analyze the impact of Trump's tariff policy on Bitcoin and the entire cryptocurrency market from multiple perspectives, including macroeconomic, monetary policy, market structure, and investment sentiment, and explore the potential future trends of Bitcoin.
I. Overview of Trump's Tariff Policy
1.1 Background of the Tariff Policy
1.1.1 The Return of Trade Protectionism
In the context of globalization, trade relations between countries have become increasingly close. However, the US trade policy has gradually shifted towards protectionism, especially during Trump's presidency (2017-2021). The Trump administration believes that the US has been at a "disadvantage" in international trade for a long time, mainly due to:
Widening trade deficits: The US has long maintained a relatively high trade deficit with countries like China, Mexico, Japan, and the European Union, which Trump believes has led to the loss of manufacturing jobs in the US.
Hollowing out of industries: Over the past few decades, the US manufacturing industry has been outsourced to Asia and other regions, leading to the shrinkage of domestic manufacturing, and the Trump administration hopes to use higher tariffs to encourage companies to return to the US.
National security considerations: Trump and his team believe that China's technological rise poses a threat to the US, and therefore try to curb China's industrial development by restricting the export of high-tech products and imposing tariffs.
1.1.2 The 2024 US Presidential Election Context
In the 2024 US presidential election, Trump has again become the Republican presidential candidate and has strongly promoted the "America First" policy during the campaign, with core measures including:
Implementing more severe trade sanctions on China: Promising to impose at least 60% tariffs on all Chinese imported goods.
Reviewing trade agreements with Mexico and Canada: If elected, he may re-evaluate the USMCA (United States-Mexico-Canada Agreement).
Exerting trade pressure on allies like Europe and Japan: Demanding they reduce their trade surpluses with the US, or face high tariffs.
The introduction of these policies has increased the uncertainty about the future trade environment in the global market, thereby affecting the flow of global capital and market sentiment.
1.2 Major Tariff Measures
The core of Trump's trade policy is to impose high tariffs on the world's major economies, especially on goods from China, the European Union, Japan, and Mexico. The specific measures may include:
1.2.1 Imposing over 60% tariffs on Chinese goods
Trump had imposed a series of tariffs on Chinese goods in 2018-2020, but if he is re-elected as president, the tariffs on Chinese goods will be even more severe.
Scope of affected goods: Including electronics, automobiles, solar panels, industrial equipment, and chip manufacturing equipment in key industries.
Impact: This may lead to an increase in US import costs and exacerbate the instability of the global supply chain.
1.2.2 Adjustments to tariff policies on Europe, Japan, and Mexico
Europe: Trump may increase tariffs on German cars, French wines, and Italian fashion brands to reduce the trade deficit between the US and Europe.
Japan: He may demand that Japan further open its market, or else increase import tariffs on Japanese automobiles and parts.
Mexico: Trump had previously threatened to impose additional tariffs on products exported from Mexico to the US, in order to force Mexico to strengthen border control. Similar policies may be restarted if he is re-elected.
1.2.3 Support policies for the US domestic manufacturing industry
Tax cuts: Providing tax incentives to companies that invest in manufacturing in the US, to encourage them to relocate their production bases to the US.
Government procurement preference: Strengthening the "Buy American" policy, requiring government agencies to purchase more domestically manufactured products.
The implementation of these measures may further tighten the global trade environment, affecting market stability, and indirectly driving the demand for decentralized assets like Bitcoin.
II. Impact of Tariff Policy on the Global Market and Economy
2.1.1 Impact of the Trade War on the Global Economy
Trump's tariff policy may have the following negative impacts:
Slowdown in global economic growth: Increased tariffs will raise the production costs of enterprises, which may lead to a decline in consumer spending and thus suppress global economic growth. The International Monetary Fund (IMF) has warned that the trade war could reduce the global GDP growth rate by 0.5% -1%.
Disruption of supply chains: Tariffs may lead companies to adjust their supply chains, increasing uncertainty. Companies like Apple and Tesla may have to find alternative suppliers, increasing their operating costs. Global inflationary pressures will rise as the implementation of tariffs leads to an increase in the prices of imported goods, which may prompt the Federal Reserve to adjust its monetary policy, affecting market liquidity.
2.1.2 Impact of the Tariff Policy on the US Economy
Although the Trump administration believes that raising tariffs can promote US economic growth, it may actually bring the following risks:
Increase in consumer costs: As many daily consumer goods rely on imports, tariff hikes may lead to increased spending by US consumers.
The tariff policies in 2018-2019 caused US businesses and consumers to pay an additional cost of over $80 billion.
Decline in corporate profitability: Tariffs may squeeze corporate profits, leading to layoffs or reduced investment. Industries such as manufacturing, retail, and agriculture may be hit harder.
Adjustments to the Federal Reserve's monetary policy: If inflation continues to rise, the Federal Reserve may delay rate cuts or further raise interest rates, which could put pressure on the stock and bond markets and increase market volatility.
2.1.3 Impact of Tariff Policy on Bitcoin and the Cryptocurrency Market
Although the market may be impacted in the short term, the trade war may indirectly benefit Bitcoin in the long run, for the following reasons:
Increased demand for safe-haven assets: Faced with global economic uncertainty, capital may flow from traditional markets to decentralized assets like Bitcoin.
Increased expectations of US dollar depreciation: If the trade war leads the Federal Reserve to implement a loose monetary policy, the US dollar may depreciate, thereby enhancing the appeal of Bitcoin.
Capital flight driving the growth of the cryptocurrency market: Historically, whenever the global market faces shocks, the demand for Bitcoin has increased.
2.2 Reactions of Traditional Financial Markets
Trump's tariff policy has exacerbated market uncertainty, undermining investors' confidence in the economic outlook and leading to a surge in risk aversion across global markets. Prices of various assets, from stocks to precious metals, have been affected.
2.2.1 Stock market plunge: Increased concerns about economic growth
After Trump announced the increase in import tariffs, the three major US stock indices - the S&P 500, the Dow Jones Industrial Average (DJIA), and the Nasdaq Composite Index (NASDAQ) - all experienced a 2% -4% decline. The stock market decline was mainly driven by the following factors: rising corporate costs and declining profitability, declining consumer spending, limited market demand, and increased market risk aversion, leading to capital outflows to low-risk assets.
Investors often withdraw from the stock market and transfer their funds to safe-haven assets (such as gold, the US dollar, and US bonds) when market uncertainty increases. Due to the outflow of capital from the stock market, the market is further under pressure, forming a downward trend.
2.2.2 Strengthening of the US dollar index (DXY): Increased demand for safe-haven assets
Here is the English translation of the text, with the specified terms translated as requested:Although Trump's tariff policy has had a negative impact on the global economy, the US dollar index (DXY) has strengthened in the short term. This is mainly due to market expectations that the Federal Reserve will not cut interest rates immediately, and investors seeking the US dollar as a safe-haven asset.
The impact of the Federal Reserve's monetary policy: Tariff policies may lead to rising inflationary pressures, causing the Federal Reserve to be unwilling to cut interest rates in the short term to prevent inflation from getting out of control. The market had originally expected the Federal Reserve to cut interest rates in the coming months, but the implementation of the tariff policy has changed this expectation, driving the US dollar higher.
Global capital flows to US dollar assets: Due to increased market uncertainty about the economy, global investors tend to hold US dollar cash or invest in US Treasuries to avoid risks. During the 2018 US-China trade war, the US dollar index briefly exceeded 100 and rose sharply, and a similar situation may occur again.
Pressure on risky assets such as Bitcoin: The strengthening of the US dollar usually puts pressure on risk assets priced in US dollars, such as Bitcoin, because capital is more inclined to flow into the US dollar market rather than the cryptocurrency market.
In the short term, the strengthening of the US dollar may lead to a decline in the price of Bitcoin, but in the long run, market concerns about the US dollar credit system may in turn promote the growth in the value of Bitcoin.
2.2.3 Precious metals rise: Gold breaks through $2,800 per ounce
Against the backdrop of heightened risk aversion sentiment, the precious metals market has seen an increase, especially with the price of gold breaking through $2,300 per ounce. This is mainly due to:
Inflow of safe-haven capital into the gold market: As a globally recognized safe-haven asset, gold is usually favored by capital during market turmoil.
Institutional investors and hedge funds may increase their holdings of gold to hedge market risks during stock market volatility.
Rising inflationary expectations, increasing the appeal of gold: Tariff policies may drive up inflation, enhancing the value-preserving function of gold.
Historical data shows that gold has often performed well in high-inflation environments. For example, during the stagflation period of the 1970s, the price of gold rose sharply.
2.3 Violent fluctuations in the cryptocurrency market
Compared to traditional financial markets, the cryptocurrency market is more volatile, mainly affected by market sentiment, leverage liquidation, and liquidity shocks.
2.3.1 Bitcoin's short-term plunge: Safe-haven asset or risky asset?
Although Bitcoin is viewed by some investors as "digital gold," under this tariff shock, the price of Bitcoin experienced a short-term plunge, briefly falling below $92,000, a drop of more than 10% from its all-time high.
In the short term, Bitcoin is still seen as a risky asset: Due to the increased participation of institutional investors, Bitcoin's correlation with US stocks has strengthened. When the market is in panic, investors often choose to sell Bitcoin and turn to the US dollar and gold.
In the long run, Bitcoin's safe-haven properties may be strengthened: If the market begins to doubt the US dollar credit system, Bitcoin may regain its safe-haven properties. For example, during the 2019 US-China trade war, Bitcoin experienced a significant rise, becoming a global capital safe haven.
2.3.2 Leverage liquidation exacerbates market sell-offs
The high leverage characteristics of the cryptocurrency market determine the non-linear price fluctuations, and when the market declines, the highly leveraged long positions are forcibly liquidated, leading to a "waterfall-like" decline.
Over $2 billion in contract market liquidation across the network: Data shows that during the Bitcoin plunge, the total liquidation volume in the cryptocurrency contract market reached $2 billion, with more than 80% being long positions.
The exchange's automatic deleveraging (ADL) mechanism further exacerbated market volatility.
Extreme market sentiment and panic selling: As the cryptocurrency market is mainly dominated by retail investors, the extremes in market sentiment have led to panic selling, amplifying the downward trend. The "Fear & Greed Index" turned from "Greed" to "Fear" within 24 hours.
2.3.3 Altcoins have larger declines
Compared to Bitcoin, the Altcoin market has performed more poorly, with generally over 15% declines.
Liquidity drying up, leading to large price fluctuations: Due to the shallow trading depth of some Altcoins, when the market sell-off occurred, the lack of buy-side orders led to rapid price collapses.
The DeFi ecosystem was also impacted: As the collateral asset values in the DeFi ecosystem declined, a large number of liquidation events occurred, further exacerbating market panic.
Three. How Trump's Policies May Benefit Bitcoin in the Long Run
Although Trump's tariff policy has caused violent market fluctuations in the short term, even leading to a temporary decline in the price of Bitcoin, these policies may actually become a driving force for Bitcoin in the long run. The main reasons are: trade wars may lead to a depreciation of the US dollar, capital flight may drive up Bitcoin demand, and the global "de-dollarization" trend may further consolidate Bitcoin's position as a reserve asset. This section will analyze in detail how these factors may benefit Bitcoin in the long run.
3.1.1 Trade wars may lead to a depreciation of the US dollar
Trump's tariff policies and protectionism may weaken the growth potential of the US economy and ultimately lead to a weakening of the US dollar, and Bitcoin often performs well when the US dollar depreciates.
3.1.2 The Federal Reserve may be forced to cut interest rates, leading to a depreciation of the US dollar
If the US economy is under pressure from the trade war, the Federal Reserve may be forced to adopt a more accommodative monetary policy, including interest rate cuts or the restart of quantitative easing (QE). The uncertainty of the trade war may lead to a slowdown in economic growth, and the Federal Reserve may have to cut interest rates to stimulate the economy. Interest rate cuts will reduce the attractiveness of the US dollar, leading to capital outflows and a depreciation of the US dollar. The depreciation of the US dollar is usually beneficial for Bitcoin.
As a scarce asset, similar to "digital gold," when fiat currencies depreciate, the appeal of Bitcoin increases.
For example, when the Federal Reserve implemented large-scale quantitative easing (QE) in 2020, the price of Bitcoin soared from $4,000 to $69,000.
3.1.3 Institutional capital may shift towards Bitcoin
Institutional investors seeking to hedge against US dollar depreciation: Institutional investors may reduce their allocation to US dollar assets (such as US Treasuries) and turn to hedging tools like Bitcoin. In 2021, companies like MicroStrategy, Tesla, and Square purchased Bitcoin to hedge against the risk of US dollar depreciation.
Bitcoin is seen as "digital gold": Over the past few years, Bitcoin's safe-haven properties have gradually strengthened, and its correlation with gold has increased.
As the US dollar depreciates, Bitcoin may become an increasingly popular hedging tool for more investors.
3.2 Capital flight may drive up Bitcoin demand
In an environment of increasing uncertainty, capital often flows from traditional financial markets to decentralized assets like Bitcoin. Trump's tariff policies may indirectly drive capital inflows into the Bitcoin market.
3.2.1 Trade wars increase market uncertainty, driving capital to seek safe havens
Increased market uncertainty leads capital to seek safe-haven assets: Tariff policies have caused market turmoil, and many investors may seek safe-haven assets like gold and Bitcoin. During the 2019 US-China trade war, Bitcoin saw a significant rise amid global stock market volatility.
The appeal of decentralized assets is enhanced: In an environment of unpredictable government policies, decentralized assets (such as Bitcoin) become more attractive due to their censorship resistance and global liquidity. Capital is no longer limited to gold or the US dollar, but will also partially flow into the cryptocurrency market.
3.2.2 The US wealthy may transfer assets to Bitcoin
The wealthy seek tax avoidance and asset protection: If Trump's tariff policies continue, leading to a deterioration of the US economy or increased tax pressure, the wealthy may seek safe havens for their assets. The global liquidity and decentralized nature of Bitcoin make it an ideal wealth preservation tool.
Here is the English translation of the text, with the specified terms translated as instructed:The 2024 Bitcoin Halving May Drive Capital Inflows: In 2024, Bitcoin will experience a new "Halving" event, where the miner reward will decrease from 6.25 BTC to 3.125 BTC, which may drive up the price of Bitcoin due to reduced supply. Combined with global economic uncertainty, wealthy investors may start positioning themselves in Bitcoin to hedge risks.
The Trend of De-dollarization Intensifies, Driving Bitcoin as a Reserve Asset
Trump's protectionist trade policies may accelerate the global "de-dollarization" process, and more countries may consider using Bitcoin as a reserve asset.
3.3.1 The Global De-dollarization Trend is Accelerating
The US's frequent use of financial sanctions has prompted countries to de-dollarize: In recent years, the US has frequently used the dollar system to impose financial sanctions on other countries (such as sanctions on Russia and Iran).
To avoid the constraints of the US dollar settlement system, many countries have begun to seek alternative solutions, such as RMB settlement, digital currencies, and Altcoin.
Trump's policies may strengthen the de-dollarization process: The trade war may prompt countries like China, the EU, and Russia to reduce their dependence on the US dollar, accelerating the "de-dollarization" process. In 2023, the BRICS countries have begun to study the establishment of a new trade settlement system to reduce their dependence on the US dollar.
3.3.2 Countries or Institutions May Consider Bitcoin as a Reserve Asset
The possibility of Bitcoin, as "digital gold", entering central bank reserves is increasing: In recent years, some countries (such as El Salvador) have already started to include Bitcoin in their national asset reserves. In the future, if global confidence in the US dollar system declines, some countries may consider Bitcoin as part of their reserve assets to diversify risks.
The asset allocation strategies of institutional investors may shift towards Bitcoin: Over the past 5 years, institutional interest in Bitcoin has risen significantly, with industry giants like BlackRock and Fidelity launching Bitcoin-related products. During periods of global economic turmoil, institutional investors may increase their Bitcoin allocations.
Market Trend Analysis: How Will Bitcoin Respond?
After the market turmoil caused by Trump's tariff policies, Bitcoin's price trend may experience short-term volatility and consolidation, medium-term rebound and recovery, and ultimately a long-term breakthrough to new historical highs. In this process, the market will be influenced by multiple factors, including the macroeconomic environment, Federal Reserve policies, institutional capital inflows, and on-chain data.
4.1 Key Support and Resistance Levels: Critical Price Levels in the Market
Bitcoin has multiple key support and resistance levels on both the technical and market psychology levels. Market movements often fluctuate around these important price regions.
4.1.1 Major Support Level Analysis
$91,000 (Short-term Support): This is the initial support area tested by Bitcoin during the decline, and if market sentiment recovers, it may become a short-term bottom area. If it breaks below $90,000, it may trigger further market panic and deleveraging.
$85,000 (Medium-term Support): This is a stronger technical support level and may be the main entry area for institutional capital. If the market reacts negatively to the Federal Reserve's policies, BTC may further correct to this area to find support.
$70,000 (Support in Extreme Cases): If the market turmoil caused by the trade war persists, and risk-averse sentiment rises, it may test this key level. This area will be an important buying opportunity for long-term investors, and may see a large influx of capital buying the dips.
4.1.2 Major Resistance Level Analysis
$105,000: This is an important level that the market is highly focused on, and a breakthrough may lead to accelerated capital inflows. Institutional investors may test the market liquidity in this area.
$110,000 (New All-time High): This is the key target that BTC may assault during the bull market, and a breakthrough may trigger FOMO (Fear of Missing Out). If global capital accelerates its inflow into Bitcoin, BTC may form a new price discovery in this area.
$150,000 (Potential Long-term Resistance): If Bitcoin enters a super-cycle driven by institutional capital, this area may become the market's new target.
4.2 Possible Market Evolution Paths: Analysis of BTC's Different Cycle Trends
Bitcoin's market trend may go through three stages: short-term volatility and consolidation, medium-term rebound and recovery, and long-term breakthrough to new historical highs. Each stage has different driving factors in terms of market sentiment, capital flows, and macroeconomic environment.
4.2.1 Short-term Volatility and Consolidation (1-3 months): Market Recovery Phase
Market Characteristics
Price Range: $80,000 - $100,000
Market Sentiment: Panic sentiment eases, observational sentiment increases
Macro Drivers: Federal Reserve policies, market liquidity, institutional buying
Short-term Market Impact Factors:
Market sentiment recovery and bottom-fishing capital entry: If $90,000 stabilizes, market panic sentiment may gradually weaken, and capital will start to re-position. If the exchange's stablecoin reserves begin to rise, it indicates that investors are preparing to re-enter the market.
Federal Reserve policies become the market focus: If the Federal Reserve delays rate cuts, the market may continue to fluctuate, waiting for clearer signals. If the Federal Reserve turns dovish, the market may see a rebound.
On-chain data monitoring: Capital flow: Bitcoin holder address analysis: If long-term holders (LTH) reduce selling, it indicates that the market is starting to stabilize. Bitcoin outflow from exchanges: If BTC flows out of exchanges in large quantities, it suggests that market confidence is recovering, and investors are choosing to hold long-term.
4.2.2 Medium-term Rebound and Recovery (3-6 months): Market Recovery, Entering an Upward Channel
Market Characteristics
Price Range: $100,000 - $120,000
Market Sentiment: Cautiously optimistic, accelerated capital inflows
Macro Drivers: Accelerated institutional capital entry, clear Federal Reserve policy direction
Medium-term Market Impact Factors
If the Federal Reserve turns dovish and liquidity improves: If the Federal Reserve announces rate cuts or a pause in rate hikes, market liquidity will improve, and Bitcoin may enter an upward trend. In 2020, when the Federal Reserve implemented large-scale easing, Bitcoin's price soared by 1600%, and history may repeat itself.
Institutional capital positioning in Bitcoin drives price recovery: After the launch of Bitcoin ETFs in 2024, institutional demand for BTC may further increase. Similar to 2021, institutions like Grayscale and MicroStrategy may continue to increase their BTC holdings.
On-chain data supports the upward trend
Increase in BTC holding addresses: If large BTC holding addresses (whale addresses) increase, it indicates that institutions have started to buy in.
Decrease in BTC supply on exchanges: The liquidity of Bitcoin on exchanges dries up, indicating strong buying demand in the market.
4.2.3 Long-term Breakthrough to New Highs (6-12 months): Entering a Bull Market Cycle
Market Characteristics
Price Range: $120,000 - $150,000+
Market Sentiment: FOMO (Fear of Missing Out), capital rushing in
Macro Drivers: Global capital seeking safe haven, Bitcoin becoming a global reserve asset
Long-term Market Impact Factors
Prolonged global trade war drives capital to seek refuge in Bitcoin: If the trade war persists, global risk-averse capital may flow into BTC.
After the 2024 Bitcoin Halving, the market supply-demand tightness may further drive up the price.
Bitcoin market cap enters the scope of institutional asset allocation: If Bitcoin's market cap breaks through $2 trillion, it may be included in the investment portfolios of more global institutions. Similar to gold, Bitcoin may become one of the assets allocated by global sovereign wealth funds.
The scale of Bitcoin ETFs continues to grow: Currently, the scale of BTC spot ETFs is still in the early stage, and in the future, it may attract more institutional capital. If ETF capital accelerates its inflow, BTC may enter a new super-bull market cycle.
4.3 Conclusion: Bitcoin Will Experience Long-term Uptrend After Short-term Volatility
Summary of Market Development Path
Short-term (1-3 months): Market volatility, support at $90,000, waiting for Federal Reserve policy signals.
Medium-term (3-6 months): Bitcoin will gradually rise to $100,000, and institutional funds will accelerate inflow.
Long-term (6-12 months): If the trade war continues, BTC may break through $120,000 and hit a new high.
Although Trump's tariff policy has caused market panic in the short term, it may accelerate the process of Bitcoin becoming a global safe-haven asset in the long run.
V. Conclusion: Short-term volatility, long-term positive
Trump's tariff policy has undoubtedly brought great volatility to the global market, especially the Altcoin market, and the short-term price performance of Bitcoin has been strongly affected by market sentiment. Bitcoin has experienced a significant price correction in the short term, with a drop of more than 10%. However, from a broader perspective, the continuous changes in the global economy and the long-term impact of Trump's policies may provide support for the long-term value of Bitcoin, driving its price to gradually rise.
Although Trump's tariff policy has led to short-term market volatility and put downward pressure on the price of Bitcoin, its core value has not changed from a longer-term perspective. As the uncertainty in the global economy increases, the trend of digitalization in the capital market, especially the development of the DeFi system, the demand for Bitcoin as a safe-haven asset will further increase, driving the rise of its long-term value.
Investors should pay attention to global economic policies, market sentiment, and the technical progress of the Bitcoin network, and make medium and long-term deployments. Although the market may continue to face certain volatility in the short term, the safe-haven asset attribute of Bitcoin and its potential as digital gold will become an increasingly important role in the global economy. As the global economic environment changes, Bitcoin will continue to be an important asset that cannot be ignored in the global financial system.
