“We’re in a [trade war] now. We have 100% tariffs. If we didn’t have tariffs, we would have no defense. They’ve used tariffs on us.”
Notably, that threat had signaled the start of a monetary standoff with ripple effects reaching deep into global markets.
As a result, traditional equities tumbled, while digital assets erased roughly $20 billion in open interest within 24 hours.
Tariffs work like a stealth tax, making imports more expensive, raising input costs, stoking inflation, and pressuring central banks to keep interest rates higher for longer. That combination often drains liquidity from risk assets like Bitcoin.
In 2018, similar tariff announcements triggered waves of volatility that pushed Bitcoin below $6,000. The pattern is repeating in 2025.
Institutional investors are gradually shifting toward defensive positions in gold, Treasury bills, and short-duration bonds.
On the other hand, Bitcoin, which still trades like a high-beta macro asset, becomes collateral damage in that flight to safety.
Yet, the situation now carries an added layer of complexity.
Unlike the 2018 cycle, Bitcoin is no longer a retail-driven instrument but a regulated asset class with deep ETF exposure and transparent derivatives markets.
Butterfill explained that tariffs slow growth, raise inflation expectations, and spark risk aversion. In this market situation, Bitcoin reacts to liquidity trends, resulting in short-term volatility.
Already, traders increasingly believe that the chances of a continued Bitcoin uptrend are slim this month.
However, Butterfill also pointed out that the top crypto recovers faster than equities in a stagflation scenario.
He said:
“In the long term, Bitcoin’s role as a hedge could be strengthened, especially if tariff policies lead to economic instability.”
Meanwhile, analysts at Bitunix told CryptoSlate that Trump’s confirmation has escalated the two nations’ economic confrontation and reshaped global risk appetite.
The effect, they said, is twofold: a short-term liquidity shock and a medium-term structural pivot in how capital views decentralized assets.
In the immediate term, heightened uncertainty drives institutions to de-risk. Funds rebalance toward cash equivalents and gold, sparking broad sell-offs in high-liquidity markets like crypto.
But beyond the initial turbulence lies a different calculus. If the trade war remains limited to tariffs and export controls, weaker global growth could depress crypto demand.
However, Bitcoin could reemerge as a geopolitical hedge if the confrontation extends into financial settlement systems. In this situation, the US might introduce restrictions on cross-border dollar access or payment rails, forcing investors to seek alternatives.
In that scenario, digital assets transition from “risk assets” to “alternative reserves.” As the Bitunix team explained:
“The erosion of confidence in the US dollar system could reinforce Bitcoin’s narrative as a ‘de-dollarization’ and ‘alternative value reserve’ asset, creating structural support.”
