Trump Tariff Announcement Sparks Market Volatility: Bitcoin, Ether, and Solana Prices Drop
When President Trump announced tariffs over the weekend, the cryptocurrency market was the first to respond. The risk-off mentality and the opinions of different analysts on what would happen next caused the prices to drop significantly. Bitcoin dropped more than 10% to a low of over $91,500 before getting back up, while other cryptocurrencies experienced more significant declines in response to President Trump’s proposal to impose 25% tariffs on imported products from Canada and Mexico and 10% tariffs on Canadian energy and Chinese goods.
- At a low of about $2,100, Ether fell by almost 36%.
- Solana’s price dropped to $176 after being cut by 24%.
- The president’s own memecoin has dropped 28% since Saturday and 77% from its peak on launch day.
One of the hardest affected was the memecoin market, as evidenced by the 40% decline in the GMCI Meme index of the top meme coins during the last several days.
Bitcoin Faces Short-Term Pressure as Trump’s Tariffs Shake Markets
According to the White House, the import taxes, which are scheduled to go into effect on Tuesday, were imposed because the three foreign governments haven’t done enough to stop the flow of drugs into the country.
If tariffs mean stronger dollar, higher inflation and reduced prospects of rate cuts in the short term, it means lower global liquidity for risk-on assets. On a longer time frame, as governments carry higher debt and higher deficit, leading to more monetary debasement, bitcoin holds relative value to the dollar, as is evident in bitcoin’s long term compounding history. But over short time frames, bitcoin is correlated to risk-assets. Thus, crypto sell off is not surprising.
analysts at research firm Bernstein
The Bernstein analysts, however, stated that after recovering from this first shock of risk-off, Bitcoin should trade according to its own fundamentals. This is because it has continuously maintained support in the $90,000 region during previous sell-offs, which have been fueled by robust institutional demand. They maintained that corporate and ETF flows should continue to be robust as the US moves toward a bitcoin national reserve.
Why Bitcoin Could Rise Sharply as U.S. Tariffs and Trade Wars Play Out?
Jeff Park, Head of Alpha Strategies at Bitwise, adopted a more optimistic outlook, predicting that bitcoin will rise sharply as this trade and monetary war plays out. According to Park, Trump’s tariffs are a short-term measure with a longer-term goal: lowering long-term interest rates and the value of the US dollar, which would eventually cause Bitcoin to soar. His thesis focused on the contradiction of a global reserve currency like the US dollar needing to be issued in large quantities to facilitate international trade. However, this continuous issuance forces the US to run persistent trade deficits, ultimately weakening its own economy over time.
In other words, Trump is trying to find a way to implement a yield curve control, not a yield curve control strategy, within the realms of the executive branch. No doubt Bessent (Treasury Secretary) is on board, recognizing that he was left a bag of trash by Yellen. As a result, the U.S. is charting a path to achieve the holy grail of fiat alchemy: lower dollar and lower yield.
Park
According to Park, the United States seeks to lessen the structural overvaluation of the dollar brought on by its reserve currency status while preserving its capacity to borrow at low interest rates. Accordingly, he contended that tariffs are a tool for negotiating a “Plaza Accord 2.0,” a multilateral deal to devalue the dollar by lowering foreign dollar reserves and reorienting demand toward longer-duration U.S. Treasuries.
Aave Founder Predicts Tariffs Will Boost Domestic Production and Crypto Demand
Others in the cryptocurrency sector were more optimistic about increasing domestic production as a possible reason for President Trump‘s tariff action. According to Aave founder Stani Kulechov, tariffs will boost domestic production and generate revenue for the United States.
Tariff wars will raise funds for other countries and increase their domestic production. It puts every nation into competing on domestic production. It’s not a recession, it’s a restructuring of the whole global economy. Crypto will act as a hedge for those who see uncertainty around unravelling equities during the transformation and DeFi yield will be hedge for those who want less uncertainty from the unravelling bond market.
Kulechov
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