Why Bitcoin Shines When Economic Policy Falters: Lessons from Trump’s Tariffs

Bitcoin has a number of unique characteristics that make it stand out from all traditional assets. This trait of the major cryptocurrency became extremely relevant after the U.S. government imposed new tariffs on imports of goods into the country. The duties adopted by President Donald Trump received a lot of criticism from experts for their blow to the global economy, but in the end, they tentatively proved to be an effective tool to influence other countries. However, digital assets still benefited from the situation. What did Trump do wrong? Analysts are criticizing the financial implications of the import duties imposed by US President Donald Trump: some believe that what is happening underscores Bitcoin’s unique economic properties in the face of global instability. Trump’s 90-day pause on raising reciprocal duties with a return to a baseline of 10 percent for most countries except China has exposed vulnerabilities in the U.S. government bond market. Economist and author of The Bitcoin Standard Saifiddin Ammus believes Trump’s reversal of higher duties was likely a reaction to rising bond yields. Well that speaks to the forced nature of such a decision. Here is a quote on the subject. Trump fought the bond market, and the market won. At first it seemed like the bet had worked – a severe stock market decline was presented as an acceptable price for fiscal sustainability. But then bonds began to collapse, and it became clear how destructive the duties were, and how mistaken it was to think that a deliberate stock market crash would support the bond market. According to sources , US ten-year bond yields rose from less than 4 percent to 4.5 percent after Trump’s announcement on duties amid a correction driven by inflation and recession fears. Here is another expert’s opinion on the situation. The rise in yields was the exact opposite of what the president’s administration wanted. The complete reversal of policy just half a day after the duties went into effect proved crushing to Trump’s negotiating position. Raul Paul, founder of Global Macro Investor, said the manipulation of duties could have been just a ”public relations play” to reach a trade agreement with China. His retort was as follows. All the talk about China giving in to Trump’s pressure sounds ridiculous now, given that he couldn’t keep the duties in place for even two days. According to Nansen analysts, delays in concluding a trade agreement could slow down the recovery of both stock and cryptocurrency markets, as their dynamics largely depend on the outcome of negotiations. Meanwhile, Bitcoin behaves quite independently amid all economic difficulties – such a feature of the crypto was emphasized by Nexo Dispatch analyst Ilya Kalchev. Bitcoin is traded not as a technological stock, but rather as a tool of defense against economic instability. Ammus suggested that the U.S. government should continue buying BTC until it has enough coins to fully cover the dollar money supply. Then the country should ostensibly move to a Bitcoin standard. Historically the dollar was backed by gold and was exchanged for a fixed amount of this precious metal until 1933. In 1971, President Richard Nixon finally stopped the exchange of the dollar for gold to protect the U.S. gold reserve and stabilize the economy. This began the era of fiat currencies, which continues to this day. When crypto starts to grow For all the positive fundamental traits, the crypto market is starting to repeat its previous patterns. In particular, data from analytics platform CryptoQuant shows that BTC outflows on exchanges have reached a two-year high. Although BTC is trading well above the early 2023 levels, demand for the crypto among exchange users resembles the beginning of a bullish trend. The 100-day moving average (SMA) of net flows on exchanges recently hit its lowest level in two years, which is also an important feature. Experts continue. Analysis of historical patterns suggests that this may indicate that investors are re-accumulating the asset. The negative value of net flow means that outflows from exchanges exceed inflows, thus reflecting high demand from users and low willingness to sell BTC through exchanges. At the same time, the total balance of BTC on exchanges is at its lowest level in recent years. CryptoQuant experts note that trading platforms’ reserves totaled 2.535 million BTC as of early April, down at least 7 percent from 2.740 million BTC at the beginning of the year. Meanwhile, larger Bitcoin holders continue to build their reserves during April, despite retail investors selling the crypto. Whales with balances from 1 to 10 thousand BTC have been actively accumulating crypto since March, despite the decline in its price. Every time the price falls, large players buy assets amid panic selling by smaller investors, which is generally a typical situation. The bottom line Bitcoin has once again confirmed its reputation as an antifragile asset – amid geopolitical instability and shaky U.S. economic policy, it is not just staying afloat, but demonstrating steady demand. Outflows from the exchanges, growing interest of major players and convergence with the image of ”digital gold” signal that the market is preparing for a new round of growth. Well, investors are presumably not done with the bullrun.

Source: Coinpaper