Crypto and stock traders were hoping to avoid a 104% tariff on Chinese goods, but the White House confirmed it will take effect on April 9. Consequently, the S&P 500 index dropped 1.6% after earlier gains. This turmoil has raised concerns about Bitcoin’s ability to regain its upward trend amid challenging economic conditions. Recent Market fluctuations led to a drop in the S&P 500 and forced Bitcoin prices down to their lowest in five months. Despite the tight correlation with the stock Market, Bitcoin could attract investors as fears of US dollar devaluation grow. Experts suggest that prolonged trade issues might push people towards Bitcoin, viewing it as a safer asset.
Crypto Markets React to US Tariff News: What This Means for Bitcoin
Crypto and stock traders were holding onto hope for a last-minute solution to avoid hefty tariffs on Chinese goods destined for the US. However, the White House confirmed that a 104% tariff would be enacted starting April 9. Following this news, markets took a downturn. Trade advisor Peter Navarro stated that these tariffs were “not a negotiation,” leading to a 1.6% loss in the S&P 500 index, reversing earlier gains.
Amid this uncertainty, traders are left questioning whether Bitcoin can regain its bullish momentum as macroeconomic conditions worsen. From April 2 to April 7, the S&P 500 index plummeted by 14.7%, contributing to fears among Bitcoin holders and pushing the cryptocurrency to revisit its lowest point in over five months at the $75,000 mark.
Spiraling US Debt Issues May Benefit Bitcoin
President Trump has indicated a desire to “reset the table” on trade, suggesting that tariffs may not be permanent. This situation has stalled IPOs and mergers, while leveraged loans and bond sales remain sidelined. Economists warn that tariffs might trigger inflation and increase the risk of an economic recession. Despite this, some investors view Bitcoin’s fixed supply as a protection against the inflationary pressures resulting from the expansion of global fiat currencies.
Short-Term Correlations and Potential Rate Cuts
In the short term, Bitcoin is likely to continue its correlation with the stock Market. Yet, the fiscal challenges facing the US government present a potential upside for Bitcoin prices. On April 8, the yield on the US 10-year Treasury rose, indicating investors demand higher returns for holding these assets. Rising costs related to maturing federal debt, set to reach $9 trillion over the next year, could weaken the US dollar, possibly paving the way for Bitcoin’s growth.
According to Morgan Stanley’s economist, the Federal Reserve may maintain higher interest rates until 2026 unless a recession occurs. This scenario could prompt earlier and larger cuts, potentially strengthening Bitcoin as an alternative asset in times of economic uncertainty.
As traders begin to realize the limited tools the Federal Reserve has to combat recession without risking inflation, Bitcoin’s momentum may shift positively. While exact timing remains uncertain, prolonged trade war issues could drive investors toward Bitcoin, especially with concerns over a potential devaluation of the US dollar.
This article is for general information purposes only and should not be considered as legal or investment advice. The views shared here are those of the author and do not necessarily reflect those of Cointelegraph.
Tags: Bitcoin, US tariffs, cryptocurrency, economic recession, inflation, S&P 500, Federal Reserve, trading strategies.
Why could Bitcoin prices go up during a global trade war?
There are a few reasons why Bitcoin could still rally despite a global trade war. First, Bitcoin is often seen as a safe haven. When trade tensions rise, investors may turn to Bitcoin as a way to protect their wealth. Second, Bitcoin operates independently of governments and traditional financial systems, making it attractive in uncertain times. Lastly, if economies face difficulties, more people may look to cryptocurrencies for alternative investments, driving up demand and prices.
What factors influence Bitcoin prices during global tensions?
Several factors can affect Bitcoin prices during global tensions. These include investor sentiment, changes in government policies, and Market speculation. If people expect trade wars to worsen, they might invest in Bitcoin, increasing its price. News events and reports about trade deals or disputes can also impact how people feel about investing in Bitcoin and other cryptocurrencies.
Is it safe to invest in Bitcoin during a trade war?
Investing in Bitcoin, like any investment, has risks. During a trade war, some may see Bitcoin as a safer option, while others might view it as risky. Prices can be very volatile, meaning they can rise or fall quickly. It’s essential to do thorough research and consider your financial situation before investing.
How does Bitcoin compare to other assets during economic uncertain times?
Bitcoin can behave differently from traditional assets like stocks and bonds. Often, when there is uncertainty in global trade, investors might pull money out of stocks and look for safe-haven assets like Bitcoin and gold. While Bitcoin can serve as a hedge against inflation or economic downturns, it can also experience price swings based on Market sentiment.
Will Bitcoin prices remain high if trade tensions continue?
It’s hard to predict future Bitcoin prices accurately. If trade tensions persist, some investors may continue to view Bitcoin as a promising investment, potentially keeping prices elevated. However, many factors can influence the Market, including regulatory changes, technological advancements, and overall economic conditions, making it important to stay informed and adapt to changes.