- If the US Dollar continues its decline, Bitcoin may emerge as the favored reserve asset.
- According to Binance CEO, the ongoing global trade war might increase interest in cryptocurrency as a non-sovereign asset.
- Following the US’s imposition of an additional 50% tariff on China, Bitcoin fell below $76,000, raising the total trade tax on Chinese imports to 104%.
On Tuesday, Bitcoin (BTC) fell below $76,000 as the cryptocurrency market extended its downward trend after President Donald Trump’s announcement of an extra 50% tariff on China. Despite this immediate drop in price, numerous cryptocurrency analysts believe that Bitcoin could experience significant growth if the US Dollar (USD) continues to decline and loses its status as a credible reserve asset.
Bitcoin may rebound amidst global trade tensions and worsening macroeconomic conditions
Despite the recent downturn in the cryptocurrency market caused by the ongoing global trade war, Bitcoin might still see a rebound.
Many cryptocurrency analysts have shared thoughts on the potential for Bitcoin to rally in light of the trade war, noting its promising growth prospects.
Richard Teng, CEO of Binance, remarked in a post on X that Bitcoin may recover, despite the current risk-averse sentiment among investors. He pointed out that while macroeconomic uncertainties have caused investors to retreat momentarily, Bitcoin retains substantial recovery prospects.
Teng emphasized that Bitcoin’s resurgence could be linked to long-term holders who regard BTC as a solid asset in times of economic instability.
“This situation could also spur interest in cryptocurrencies as a non-sovereign store of value,” Teng mentioned in his X post on Tuesday. “Many long-term investors still consider Bitcoin and other digital currencies as robust during periods of economic turmoil and shifting policy frameworks,” he added.
Likewise, Matt Hougan, Chief Investment Officer at Bitwise, expressed a similar viewpoint, referencing a speech by Steve Miran, Chairman of the White House’s Council of Economic Advisers.
Miran’s address underscores the impact of the US Dollar’s role as a global reserve currency in exacerbating trade deficits, also indicating that the demand for the US Dollar has skewed currency markets.
Hougan interprets Miran’s comments as a suggestion that the USD might weaken further, which could positively influence Bitcoin’s price in the short run, given its negative correlation with the US Dollar Index (DXY).
“In the near term, I expect that a weaker dollar will be beneficial for Bitcoin,” Hougan noted in a memo to investors on Tuesday.
He also pointed out that a depreciating dollar could trigger disruptions in global markets, thereby paving the way for newer reserve assets to emerge.
“I believe we are transitioning from a single reserve currency (the Dollar) to a more fractured reserve system, where assets like Bitcoin and gold will play a more significant role,” Hougan observed.
In a similar vein, Mathew Sigel, Head of Digital Assets Research at VanEck, noted in a communication with investors that a weaker Dollar might lead to Bitcoin’s adoption as a safe-haven asset. He mentioned that a significant factor that could drive Bitcoin’s rise is the Fed’s policy response.
“If tariffs adversely impact GDP without igniting a new inflation surge, the Fed might have room to reduce rates — restoring the liquidity conditions under which Bitcoin has typically thrived,” Sigel wrote.
In the past week, Bitcoin has experienced heightened volatility following President Trump’s announcement of reciprocal tariffs on over 180 countries. The cryptocurrency descended below $76,000 on Tuesday after the implementation of Trump’s additional 50% tariffs on China, resulting in a total levy of 104% on Chinese goods.
Concurrently, the stock market reacted negatively, with the S&P 500 erasing earlier gains after suffering a 6% drop, equating to a $2.5 trillion loss in market capitalization on Tuesday, according to Google Finance data. The index did experience a minor recovery before the market closed, finishing the day with a 1.57% loss.
