Bitcoin (BTC) is positioned to benefit in the long term regardless of the outcome of President Donald Trump’s trade policies, according to Bitwise head of alpha strategies Jeff Park.
Whether a successful agreement leads to a weaker dollar or an extended trade conflict results in increased monetary stimulus, Park argued that Trump’s economic strategy, including tariffs, could be a long-term positive catalyst for Bitcoin.
Trump imposed 25% tariffs over the weekend on all imports coming from Canada, Mexico, and China. The affected countries responded by announcing retaliatory actions, which strengthened the US dollar more than 1% versus major currencies, and caused a decline in the prices of equity futures, crypto, and cryptocurrency.
Bitcoin Ethereum (ETH) In the midst of an overall market crash, both stocks dropped about 5% and 17 %.
Bitcoins poised for a rise
Low-liquidity weekend trading, and leveraged trades can magnify price movements in the crypto market. A wave of liquidations was triggered by the selloff, which saw an estimated $10 billion worth of leveraged positions disappear over a 24-hour period from Sunday evening to Monday morning. This is the biggest liquidation in cryptocurrency history.
Park’s analysis is rooted in the Triffin Dilemma, which describes the challenges faced by a country that issues the world’s reserve currency. The US dollar’s global reserve status creates a persistent trade deficit and an overvalued dollar while also enabling the U.S. government to borrow at lower rates due to sustained demand for its debt.
Trump’s economic strategy appears to address these imbalances while maintaining the advantages of dollar hegemony. Analysts view tariffs as an instrument to encourage other nations to negotiate, leading potentially to a multilateral deal to weaken dollars without raising interest rates.
One historical precedent was the Plaza Accord of 1985, when West Germany France the UK and Japan decided to devalue the US Dollar in order to boost American manufacturing.
The US dollar’s role as a global reserve currency creates a persistent trade deficit and an overvalued dollar. The US dollar’s role as a global reserve currency creates a persistent trade deficit and an overvalued dollar.
Trump’s economic strategy
Trump’s economic strategy appears to address the negative aspects of this dilemma while retaining its benefits. Analysts view tariffs as an instrument to get other countries around the table for negotiations, which could lead to a multilateral deal to weaken dollars without raising long-term rates.
The 1985 Plaza Accord is a historical precedent, in which West Germany, France UK and Japan all agreed on a coordinated dollar devaluation. This agreement was a support for US manufacturing, and partly prompted by tariff threats.
Bitcoin may benefit from lower interest rate investments if Trump negotiates an agreement similar to the one he has with China. Interest rates are a major factor in risky asset investment. However, if negotiations fail and a prolonged tariff war ensues, the expected economic slowdown could lead to large-scale monetary stimulus—another historical factor that has supported Bitcoin prices.
Park thinks that Bitcoin will rise regardless of whether the devaluation is controlled or there’s an economic recession.
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