As of January 2024, over 580 million people worldwide use cryptocurrencies, according to Crypto.com. Among these digital assets, Bitcoin stands out—not just as the oldest, but also as the most recognized, often compared to gold. Interestingly, many countries, including the U.S., now classify Bitcoin as a commodity.
But with the United States introducing new tariffs on trade, what does that mean for Bitcoin and the rest of the crypto market? We asked James Butterfill, a leading voice in crypto analysis, to break it down.
🔻 Short-Term Effects: Tariffs May Hurt Bitcoin
According to James Butterfill, tariffs could negatively impact Bitcoin in the short term. Here’s why:
1. Slower Economic Growth
Tariffs can slow down global trade, reducing economic activity. When the economy weakens, investors often avoid risky assets—including Bitcoin.
2. Rising Inflation
Higher import taxes raise the cost of goods, contributing to inflation. This can lead central banks like the U.S. Federal Reserve to raise interest rates, which usually reduces investment in cryptocurrencies.
3. Price Volatility
Because Bitcoin often moves in sync with the stock market, especially tech-heavy indices like the NASDAQ, it may see short-term price drops when economic uncertainty increases.
📈 Long-Term Outlook: A Potential Rebound
While the short-term might be rough, the long-term picture could be very different.
🧮 The Stagflation Scenario
If the U.S. economy slows while inflation remains high (a situation known as stagflation), the Federal Reserve may not be able to keep raising interest rates.
🚀 Bitcoin as a Hedge
When traditional tools fail, investors may turn to Bitcoin as a safe-haven asset—similar to how it behaved during the banking crisis in March 2023.
🔄 Bitcoin vs. Altcoins: Different Reactions
James Butterfill also highlights that Bitcoin and other cryptocurrencies don't behave the same way in these economic situations.
🟡 Bitcoin = Digital Gold
Bitcoin is becoming more like gold—a store of value.
It reacts to global economic trends and liquidity cycles.
🟣 Altcoins = Tech Stocks
Coins like Ethereum act more like growth stocks.
Their performance is often tied to the technology industry and new developments in blockchain.
📉 Correlation Matters
Bitcoin’s correlation with NASDAQ is now around 40%, much lower than its past high of 72%.
Ethereum and other altcoins still have a higher correlation with the tech sector.