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President Donald Trump‘s tax reform proposals, combined with his stringent tariff policies, have notably shaken the cryptocurrency market, causing increased volatility and an ETF-driven decline in Bitcoin (CRYPTO: BTC) in recent weeks.
Trump’s initiative to abolish income tax for individuals earning less than $150,000—expected to impact 93% of Americans—intends to enhance disposable income, but his concurrent tariff increases, including a universal rate of 20% and 60% on Chinese imports, have ignited inflation concerns, affecting risk assets like cryptocurrencies.
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The interaction of these policies, together with the Strategic Bitcoin Reserve, has created a complicated environment for crypto investors.
Trump’s tax plan seeks to make the 2017 Tax Cuts and Jobs Act (TCJA) permanent, which reduced the top income tax rate from 39.6% to 37%, now also covering incomes below $150,000, as well as tips, overtime pay, and Social Security benefits, according to Tax Foundation data.
Commerce Secretary Howard Lutnick, in a CBS News interview on March 12, asserted that these actions “generate revenue and stimulate growth,” potentially allowing Americans to invest in assets like Bitcoin.
However, the projected revenue shortfall of $4.9 trillion over a decade, as estimated by the Penn Wharton Budget Model, is supposed to be balanced by tariffs, which could generate $3.3 trillion but may also reduce GDP and encourage inflation, a concern highlighted by the Peterson Institute for International Economics.
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The effects on the crypto market have been immediate: Bitcoin plummeted from $105,000 to $92,000 (-12.38%) following the February 1 tariff threat but rebounded to $100,000 (+8.7%) on February 3 when the tariff on Mexico was paused.
It dropped from $94,834 to $86,500 (-8.79%) after the March 3 tariff confirmation, fell to $78,225 (-14.45%) by March 5 post-implementation, and lost 5% from $89,200 to $84,600 in the wake of the March 7 Bitcoin Reserve signing.
