dropped in value: pending announcement from Trump regarding tariffs on crypto markets, affecting Bitcoin and Ethereum specifically
In the ever-evolving world of finance, the interplay of tariffs, trade tensions, and cryptocurrencies has become a captivating subject. Over the past few months, significant events have shaped the landscape of Bitcoin and Ethereum, two of the most prominent digital assets.
On July 8, 2021, over $300 million in positions were closed in a single day, reflecting the heightened volatility in the crypto market. This turbulence can be attributed to a myriad of factors, including potential new tariffs and the ongoing trade tensions.
Bitcoin and stablecoins have gained prominence as a store of value and an alternative to physical dollars in countries with limited access to foreign currencies. However, the potential new tariffs imposed by Donald Trump on over 100 countries have created mixed impacts on Bitcoin and Ethereum's price and future outlook. Initially, the announcement of higher tariffs led to a surge in Bitcoin and Ethereum prices, as investors sought refuge in cryptocurrencies amid rising global economic uncertainty and trade tensions.
However, as the tariffs took effect more broadly and triggered global risk aversion and liquidity crunches, Bitcoin experienced a sell-off, dropping below $115,200. Ethereum showed slightly more resilience with inflows contrasting Bitcoin’s ETF outflows, suggesting some investor confidence in Ethereum's prospects.
The 90-day tariff truce established by Trump's administration is set to expire on July 9, 2021. If new tariffs affecting over 100 countries come into effect from this date, as letters sent by the White House suggest, the crypto market could face further volatility.
Altcoins like Solana, Cardano, XRP, and Dogecoin have registered drops of between 1% and 3%, while some meme coins linked to political figures have lost up to 10% of their value.
The "Crypto Week" in Washington, the behavior of Bitcoin ETFs, and decisions by the Federal Reserve will be key factors in determining the short-term direction of digital assets. Trump has shown flexibility in implementing tariffs, delaying deadlines and extending truces.
Cryptocurrencies could function as a hedge against the devaluation of local currencies and restrictions on cross-border payments in emerging markets affected by tariffs. In regions where commercial sanctions make access to traditional banking services difficult, the use of DeFi platforms is expected to increase.
In terms of future outlook, the situation remains complex: if tariff-induced trade disputes and global economic instability persist or escalate, cryptocurrencies could benefit as safe-haven assets. Simultaneously, macroeconomic headwinds, including high inflation and tight monetary policies, may continue to impose challenges on crypto price growth.
The lack of bilateral agreements between the United States and key partners such as Japan, South Korea, and the European Union has caused concern in the markets. Nevertheless, the Trump administration's pro-Bitcoin policies provide some long-term optimism.
The U.S. Congress is expected to debate three key projects for the cryptocurrency market from July 14, 2021. These developments, coupled with the ongoing tariff negotiations, will undoubtedly shape the future of Bitcoin, Ethereum, and the broader crypto market.
In summary, potential new tariffs have introduced both upward short-term momentum due to uncertainty-driven crypto demand and downward pressures from increased market risk and liquidity tightening, resulting in a volatile but cautiously optimistic outlook for Bitcoin and Ethereum in 2021. Uncertainty dominates the current landscape, although it is also opening the door to new opportunities in the crypto market. Recent weeks have seen multi-million dollar liquidations in the crypto market, underscoring the need for careful investment strategies in these times of flux.
In the context of potential new tariffs and ongoing trade tensions, other digital assets like Solana, Cardano, XRP, and Dogecoin may also face volatility, similar to Bitcoin and Ethereum. The technology behind these cryptocurrencies could provide a hedge against devaluation of local currencies and cross-border payment restrictions in emerging markets affected by tariffs.
