Summary
In 2025, the Trump administration's renewed emphasis on tariffs is reshaping the global economic landscape, with particularly evident impacts on the digital asset market. Tariffs, initially intended to protect domestic industries, have second and third order effects that ripple through financial markets, monetary policy, global capital flows, and technology supply chains, all of which are closely related to the crypto economy. This report will delve into how tariffs impact the crypto market, focusing on liquidity, the mining economy, capital flows, monetary fragmentation, and Bitcoin's new role in the global financial order.
1. Background: 'America's Ponzi' and Global Capital Flows
After World War II, the U.S. built a self-reinforcing economic cycle: foreign countries exported goods to the U.S., and the dollar surpluses earned were reinvested in U.S. assets (Treasuries, stocks, real estate), suppressing yields and boosting asset prices. This cycle supported credit expansion, consumption growth, and asset inflation, making the dollar the world's top reserve currency.
However, the excessive fiscal spending, aggressive monetary easing, and rising national debt levels during the COVID-19 pandemic have undermined the stability of this system. The Trump administration's reintroduction of tariffs attempts to 'force restart' this system, but this may shake the core mechanism sustaining this 'Ponzi game.'
The impact of tariffs on the crypto market
Operating Principle:
Tariffs reduce foreign exporters' dollar surpluses.
With reduced surpluses, less money flows into U.S. assets.
U.S. asset prices, once supported by foreign capital, now need to prove themselves through fundamentals (earnings, growth).
Disruption of liquidity channels affects all asset classes, including the crypto market.
The chain reaction of tariffs on U.S. assets
2. Short-term Impact: Liquidity Shock and Shift in Sentiment
Liquidity loss under risk-averse sentiment: Tariffs trigger global risk-averse sentiment, leading to downward adjustments in growth expectations. Bitcoin (BTC), as a highly volatile asset, initially shows a negative correlation with the stock market during this liquidity shock. After Trump's tariff policy announcement in April 2025, Bitcoin fell approximately 8% in a single day, briefly touching $81,000.
Rising Mining Costs: Tariffs on Chinese mining hardware (ASICs, GPUs, semiconductors) have increased capital expenditures for mining equipment.
Model Prediction: A 10% increase in ASIC costs, if energy costs and network difficulty remain unchanged, could shrink mining profit margins by 6-8%.
Elasticity Impact: High costs may drive out marginal miners, slowing hash rate growth and tightening the mining economy.
Semiconductor Supply Chain Pressure: Tariffs on critical chip components disrupt the production of next-generation mining hardware, potentially delaying hash rate expansion and increasing concentration risk in mining centers.
The impact of tariffs on BTC mining and the market
3. Mid-term Impact: Restructuring of the Monetary System and Cryptocurrency Adoption
Federal Reserve Policy as a Catalyst for Bitcoin: If tariffs drag down GDP growth but do not reignite inflation (due to reduced consumption rather than supply shocks), the Fed may shift towards easing (i.e., dovish).
Mechanism of Action: Lower interest rates expand liquidity, decreasing real yields, historically favorable for Bitcoin prices (negative real rates boost non-yielding assets).
Observation: As of the end of March, the net inflow for spot BTC ETFs year-to-date is approximately $600 million, indicating steady demand despite tariff fluctuations.
Weaponization of Trade Infrastructure: Trade sanctions and tariffs accelerate de-dollarization trends.
Empirical Data:
China and Russia use Bitcoin and other digital assets for energy trade settlements.
Bolivia explores importing energy with cryptocurrencies.
France's EDF considers monetizing exports through Bitcoin mining.
These initiatives validate the value of Bitcoin as a neutral settlement layer, free from sovereign interference.
Global Capital Reallocation: Foreigners reduce purchases of U.S. Treasury bonds, putting long-term assets (stocks, bonds) under pressure. In this scenario, non-sovereign assets like Bitcoin may attract liquidity seeking alternative reserves.
Economic Power and the Role of BTC
4. Long-term Impact: Bitcoin as a Currency Sovereignty Channel
Inflation Hedge and Fiat Currency Devaluation: If trade disputes long-term weaken the purchasing power of fiat currencies, Bitcoin's utility as an inflation hedge may strengthen.
Historical Analogies:
Surge in local Bitcoin usage during currency collapses in Argentina and Turkey.
Performance of gold after the collapse of the Bretton Woods system.
The evolution from risk asset to reserve asset: Bitcoin's performance depends on the path taken.
If instability in sovereign currencies becomes the norm, Bitcoin's volatility relative to fiat may decrease, attracting institutional allocations.
Key Indicators:
Convergence of volatility compared to the stock market.
Increased correlation with Treasury Inflation-Protected Securities (TIPS).
Pilot allocations by treasuries and sovereign wealth funds.
Multipolar Currency System and Bitcoin Settlement Layer: The dissolution of the U.S.-dominated trade framework gives rise to alternative cross-border settlement layers, where Bitcoin's decentralization and censorship resistance provide unique advantages.
Potential Trends:
Central banks in various countries hold Bitcoin as a reserve diversification hedge.
Energy-exporting countries prefer to use Bitcoin for settlements to avoid dollar risk exposure.
The long-term impact of BTC on currency sovereignty
5. Key Indicators Investors Should Focus On
Federal Reserve Interest Rate Outlook: Changes in federal funds futures curve.
Dollar Index (DXY) Trend: Continued weakness is favorable for Bitcoin.
BTC ETF Net Inflows: Reflects institutional interest.
On-chain Data: Holder behavior, whale accumulation, exchange reserves.
Global Trade Policy Escalation: Focus on EU and China's retaliatory measures.
Sovereign Bitcoin Settlements: Attention to Bitcoin transaction events confirmed by national entities.
Key Investment Indicators
6. Conclusion: A New Monetary Paradigm?
On the surface, tariffs are aimed at trade balance and industrial protection, but their chain reactions touch every corner of the global capital market. For the crypto market, tariffs are not only short-term risk events but may also catalyze a major restructuring of global financial trajectories.
As economic nationalism, trade fragmentation, and de-dollarization trends accelerate, Bitcoin's concept as a 'neutral currency' is becoming less distant. In a financially fragmented multipolar world, Bitcoin's role as a sovereign neutral reserve asset and energy settlement layer may not only survive but thrive.
Investors, miners, and protocol developers should adjust strategies to adapt to this era of redefined liquidity flows, monetary credibility, and sovereign trust.
Source:
Original Author: LSTMaximalist
