#BitcoinWithTariffs

What is the impact of tariffs on crypto?

Cryptocurrencies have become a major part of the global economy, with over 580 million users worldwide as of January 2024 (according to Crypto.com). Given that Bitcoin is classified as a commodity in many countries, especially the United States, it's worth considering how the new US tariffs may affect Bitcoin and the broader crypto market.

Once again, we seek insights from James Butterfill.

How do tariffs impact the world and also affect Bitcoin?

James Butterfill: In the short term, tariffs will have a negative impact on Bitcoin. Unlike gold, Bitcoin has a growth component, which means it reacts to economic trends and liquidity cycles.

Initially, tariffs could:

Slow economic growth, reducing demand for risk assets like Bitcoin.

Increase inflation, which could lead to speculation on higher interest rates.

Cause Bitcoin prices to temporarily decline—since it often correlates with equities.

However, the long-term picture is different. At some point, the market will realize that the US cannot continue to raise interest rates while the economy weakens (stagflation). When that happens, Bitcoin is likely to rebound while stocks continue to weaken.

Currently, Bitcoin's correlation with NASDAQ is around 40%, well below its peak of 72%. However, as we saw in March 2023, during the banking crisis, Bitcoin can decouple and act as a safe haven: this is the paradox of Bitcoin, Bitcoin can be a volatile asset and a safe haven.