We are now facing a new scenario from Trump, who proposes to lower or even eliminate the federal income tax when he starts implementing a completely new tariff system in an attempt to gain project support.
Trump wants to eliminate or significantly reduce the federal income tax and claims he will compensate for the revenue by raising tariffs on imports, but the American consumer will pay more for foreign goods, purchasing power will weaken, and inflation may increase.
In 2018, when Trump imposed tariffs on China, prices rose, inflation accelerated, and the Fed raised interest rates to control prices, then growth slowed.
Bitcoin rose as a hedge against inflation, and in 2022 it fell with interest rate hikes and the onset of recession.
The current state of the crypto market.
Inflation around three to four percent by early 2025, and financial institutions have started to cautiously return and added Bitcoin to their portfolios.
Alternative currencies have gone through a significant liquidation phase, and investors have focused on Bitcoin as a relatively safe asset.
The potential impact on crypto.
The demand for Bitcoin may increase if inflation rises and the value of the dollar weakens, but there will be high volatility with any news about tariff adjustments or political changes. Additionally, the government may tighten regulations on digital asset trading and impose transaction fees.
Future Scenarios
Scenario A: Full implementation of the proposal and elimination of the income tax and high tariffs will increase demand for Bitcoin as a hedge.
Scenario B: Partial implementation and slight tax reduction with moderate tariffs will lead to moderate volatility and limited demand.
Scenario C: A retraction of the proposal or minor adjustments will achieve relative stability in inflation, and the price of Bitcoin may hold steady or drop slightly.
Random policies create hedging opportunities for digital assets like Bitcoin, but they also generate high volatility and regulatory risks.
Diversification and risk management are essential to preserving capital and benefiting from gains.
