US President Donald Trump’s tariffs are predicted to cause a significant increase in Bitcoin (BTC) prices in the long term, according to Jeff Park, the head of alpha strategies at BitWise, a financial services firm. This is due to the anticipated weakening of the US dollar in global currency markets and lower yields on US government securities. Park argues that the purpose of the tariffs is to weaken the US dollar in international trade, correct trade imbalances, and make US exports more appealing. He even suggests that a new version of the Plaza Accord, a 1985 agreement between the US, Japan, West Germany, France, and the UK to weaken the US dollar, is on the horizon. Park believes that the tariffs will lead to increased inflation, which will disproportionately affect US trading partners and result in a further devaluation of currencies globally. As a result, citizens of these countries are expected to turn to alternative assets such as Bitcoin as a store of value.
However, despite this positive long-term outlook, crypto markets experienced a decline in response to President Trump’s recent announcement of tariffs on Canada, China, and Mexico. The price of Bitcoin dropped by approximately 7.2% over the past week, although it fared better than most altcoins. Data from CoinMarketCap reveals that altcoins, including Ether (ETH), Sol (SOL), and XRP (XRP), experienced larger declines of around 11.6%, 19.3%, and 16.6% respectively. Investors are concerned that the trade war may lead to increased inflation in the coming months and have sought refuge in risk-off assets as a hedge against macroeconomic uncertainty.
In the short term, the US dollar has shown strength. The US Dollar Currency Index (DXY), which measures the strength of the US dollar against other fiat currencies, has been steadily rising since October 2024. Although there was a slight pullback in January, the dollar has partially regained lost ground in the first few days of February. The rising value of the US dollar, along with increasing US dollar yields, may pose challenges for the short-term price of Bitcoin and other risk-on assets, as investors shift from riskier assets to US government securities.
Please note that this article does not provide investment advice or recommendations. Investing and trading always involve risks, and readers should conduct their own research before making any decisions.