Bitwise: Trump's tariff war will ultimately benefit Bitcoin
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Bitwise: Trump's tariff war will ultimately benefit Bitcoin
Bitcoin wins, fiat loses. In any scenario, Bitcoin will rise.
Navigating Web3 tides with focused insightsBy: Matt Hougan, Chief Investment Officer at Bitwise; Jeff Park, Portfolio Manager and Head of Alpha Strategies
Translation: 0xjs@Jinse Finance
If you understand history and think long-term, the market pullback over the weekend looks more like an opportunity than a threat.
Crypto markets dropped sharply in recent days, with Bitcoin falling about 5% and many other assets declining even more. As I write this Monday morning in London (where I'm attending a conference), Ethereum is down 17%, Solana down 8%, and XRP down 18%.
The immediate trigger for the decline was concern over a global trade war. Over the weekend, President Trump imposed 25% tariffs on most imports from Canada and Mexico, and 10% tariffs on Chinese goods, prompting all three countries to announce retaliatory plans. This move pushed the U.S. dollar up over 1% against other major currencies and caused sharp declines in stock futures and crypto prices.
Of course, because this is crypto, the troubles don't end there.
In crypto, extreme volatility—especially during low-liquidity weekends—is often amplified by widespread leverage. Negative news drives price declines, which force leveraged traders to sell to close positions, pushing prices lower still and triggering more liquidations. This cycle continues until leverage is exhausted.
Sure enough, within a 24-hour period from Sunday night to Monday morning, the largest liquidation event in crypto history likely occurred, with as much as $10 billion in leveraged positions wiped out.
Bitwise investors are typically long-term holders, so these short-term, leverage-driven pullbacks are generally seen as opportunities rather than threats—as long as the news catalyst is truly temporary.
So—is it? That's a trillion-dollar question.
My colleague Jeff Park leads Bitwise's Alpha team and is one of the sharpest minds at the intersection of macroeconomics and crypto. He believes that Trump’s economic playbook, including the use of tariffs, is actually a long-term positive catalyst for Bitcoin.
Below, I’ll let Jeff share his views:
The outcome: Bitcoin wins, fiat loses. In either scenario, Bitcoin rises.
To understand the long-term impact of tariffs on Bitcoin, keep two things in mind: 1) The "Triffin Dilemma," and 2) President Trump’s long-term goals.
First, the "Triffin Dilemma." Named after the Belgian-American economist who proposed the concept in the 1960s, it refers to both the benefits and drawbacks of being the world's reserve currency.
On the downside, the U.S. dollar is structurally overvalued because other countries need it as a reserve currency (regardless of price), and the U.S. must run persistent trade deficits to supply dollars globally. On the upside, the U.S. government can borrow consistently at lower-than-"appropriate" costs due to constant demand for its debt.
Trump wants to eliminate the downsides while preserving the upsides.
How does Trump plan to achieve this? Through tariffs.
Tariffs are usually temporary negotiating tools used to achieve broader goals—and that appears to be the case here. We believe the ultimate goal is a multilateral agreement to weaken the dollar without raising long-term interest rates. A feasible path involves forcing countries to reduce their dollar reserves while extending the maturity of U.S. Treasuries. This would suppress long-term rates while supporting U.S. manufacturing.
But how do you get countries to agree? You have to force them to the negotiating table.
The U.S. has done this before. In 1985, West Germany, France, the UK, and Japan signed the famous Plaza Accord, agreeing to orderly depreciate the dollar against other currencies. The accord greatly helped U.S. manufacturers, who had struggled to compete globally under a strong dollar. (Why did these countries sign? One reason—yes, you guessed it—fear of tariffs.)
If Trump can bully his way to such an outcome, few assets stand to benefit more than Bitcoin. Lower interest rates would boost risk appetite among U.S. investors, lifting Bitcoin prices. Abroad, nations facing economic weakness would resort to traditional stimulus measures, again boosting Bitcoin.
What if he fails? What if we face prolonged tariff wars? We firmly believe the resulting economic weakness would lead to money printing on a scale never seen before. Historically, such stimulus has been extremely favorable for Bitcoin.
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