Why Bitcoin Wins No Matter The Outcome Of Trump’s Trade War
As global economic friction escalates, tariffs imposed by President Trump have swept financial markets this week, cutting stocks, bitcoin and cryptocurrencies. But a new memorandum Proposed from Bitwise Asset Management, these headwinds may eventually push Bitcoin to new heights without pointing to whether Trump’s strategy succeeds or fails.
At the beginning of this week, the crypto market Witnessed a serious sale. Bitcoin fell by about 5%, while Ethereum and XRP suffered more significant losses, at 17% and 18%, respectively. The direct catalyst is Trump’s 25% tariff on most imports from Canada and Mexico, and 10% tariffs on China. In revenge, those trading partners announced their own countermeasures.
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The U.S. dollar passed a response to the major currencies jumping more than 1%. Coupled with the lingering liquidity of the cryptocurrency market last weekend, a wave of forced liquidation has triggered as leveraged traders sell to a decline. According to Bitwise chief investment officer Matt Hougan, up to $10 billion of leveraged positions were removed in what he called the “largest liquidation activity in crypto history.”
Despite the sharp price move, Jeffrey Park, head of Alpha strategy at Bitwise, is still optimistic about Bitcoin’s trajectory. He pointed out two guiding ideas to shape his Bullish papers: “Triffen’s Dilemma” and President Trump’s broader goal to reorganize U.S. trade momentum.
Triffin’s dilemma highlights the conflict between currencies used as global reserves, namely consistent demand and overvaluation – and the need for a sustained trade deficit to provide sufficient currencies abroad. Although this status makes it easy for the United States to borrow, it also puts ongoing pressure on domestic manufacturing and exports.
“Trump wants to get rid of the negative, but keep a positive attitude,” Parker explained. He showed that tariffs could be a negotiating tool to force other countries, a 1985 Square Agreement that led to the depreciation of the dollar in coordination with others,” he said. Major economies.
Two situations: Bitcoin wins, Fiat loses
Parker believes that Bitcoin will benefit under two different consequences of Trump’s current trade policy:
Plan 1: Trump successfully weakens the dollar (while keeping tax rates low)
Risk appetite among U.S. investors could surge if Trump can manipulate multilateral agreements (Akin to “Platform Agreement 2.0”) to reduce the overvalued dollar without raising long-term interest rates. In this environment, non-supervised assets without capital control and dilution may attract more inflows. Meanwhile, other countries’ struggles to cope with weaker dollar consequences may deploy fiscal and monetary stimulus to support their economy, potentially pushing more money to alternative assets such as Bitcoin.
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“If Trump can bully himself into the position, there is no better asset than Bitcoin. Lower interest rates will ignite the appetite risk of U.S. investors, thus making prices higher. Abroad, countries will face weakened economies and will turn to classic economic stimulus to compensate, again leading to higher prices of Bitcoin,” Parker said.
Plan 2: Long trade wars and a lot of currency printing
If Trump fails to reach a broad deal and a settlement of the trade war, it is almost certain that global economic weaknesses will cause widespread monetary stimulus from central banks. Historically, this is a large scale Liquidity Investors seek warranty and decentralized assets quarantined from central bank policies, injection volume is bullish on Bitcoin
“What if he fails? What if we get a constant tariff war? Our high conviction view is that the resulting economic weakness will lead to a larger scale of currency printing than we have ever seen. Historically, This stimulus is very good for Bitcoin,” Parker said.
At press time, BTC traded at $98,557.
Featured Images created with dall.e, Charts for TradingView.com
