Bitcoin took a double hit from tariffs
The White House's threat to impose 10% tariffs on eight European countries from February 1st, with a potential increase to 25% by the summer. It has become a nightmare for Bitcoin. Investors already saw this horror movie in April last year, when BTC lost about a third of its value reacting to the threat of the highest import levies since the 1930s.
Bitcoin is taking a double hit from tariffs. Donald Trump's intention to turn the United States into the world’s crypto capital has made crypto a kind of American asset. Therefore, the return of the ‘sell America’ trade quickly pulled the rug out from under the BTC bulls.
At the same time, digital assets faced an outflow of capital to the gold market. Its record highs on America's Independence Day and its first rise above $4,700 per ounce in history in January were the result, in part, of money flowing in. Previously, investors bought Bitcoin simply because it was rising. Now the same thing is happening with gold. A significant part of its rally is speculative in nature.
On EU-US trade conflict escalation, the paths of Bitcoin and US stock indices are likely to converge again. They diverged in the fourth quarter, and one of the reasons was artificial intelligence technology. It helped stocks grow and prevented BTC from doing so. According to Jefferies, the development of quantum computing will seriously undermine the reliability of crypto wallets. The security of storing funds in them will decline, which will reduce confidence in digital assets and contribute to a collapse in their prices. The company has reduced the share of cryptocurrencies in its portfolios by 10%.
Thus, after a fairly successful start to the year, Bitcoin has once again fallen out of favour with investors and is poised to resume its downward trend. What can save it? The Supreme Court may lend a helping hand to the crypto market. The abolition of universal tariffs will be favourable for US stocks and may trigger a correction in gold. The outflow of capital from it allows us to expect that part of the pie will go to cryptocurrency.
Author
Alexander Kuptsikevich, a senior market analyst at FxPro, has been with the company since its foundation. From time to time, he gives commentaries on radio and television. He publishes in major economic and socio-political media.
