Bitcoin Faces 12% Q1 Decline Amid Tariffs, Fed Policy Shifts

Bitcoin is currently experiencing a period of volatility due to new tariffs, Federal Reserve policies, and the upcoming tax season, which have created market uncertainty. However, several crypto analysts, particularly BitMEX co-founder Arthur Hayes, suggest that these economic headwinds could ultimately drive Bitcoin to new heights.

The Trump administration recently announced a wave of new tariffs taking effect April 5. All countries will face a baseline 10% tariff, with higher rates for specific nations. Hayes views these tariffs as potentially positive for Bitcoin, stating that global imbalances will be corrected and the pain papered over with printed money, which is good for Bitcoin.

Hayes points to several factors that could fuel Bitcoin’s growth amid economic disruption. One is the weakening of the US Dollar Index as overseas investors sell US stocks and “bring money home.” April 3 saw a significant point loss for the Nasdaq 100, which could indicate a shift in investor sentiment towards safer assets like Bitcoin.

Bitcoin currently trades around $83,000, but has shown weakness since Trump’s inauguration on January 20. The first quarter of 2025 saw a 12% decline in Bitcoin’s price, marking its worst first-quarter performance in seven years. Hayes believes Bitcoin needs to maintain a key support level of $76,500 until Tax Day on April 15 to sustain its upward momentum. During the March tariff announcements, Bitcoin dipped to $76,623, testing this critical support area.

The stringent tariff on China could lead to a weakening yuan, potentially driving Chinese investors toward Bitcoin as a store of value. Hayes explained that with a 65% effective tariff levied, China could respond by allowing the yuan to weaken past 8.00, which could further boost Bitcoin’s appeal as a safe haven asset.

The Federal Reserve’s monetary policy decisions appear central to Hayes’ Bitcoin outlook. He noted that the two-year Treasury yield “dumped” following the tariff announcement, signaling market expectations for rate cuts. Hayes believes these imbalances cannot be fixed until the Fed intervenes with rate cuts and increased liquidity. He suggests that the Fed and banking system must ensure a well-functioning treasury market, which means money printing.

Trump has consistently advocated for rate cuts, and Hayes suggests this could be the deciding factor in market revival. During the COVID era, the Fed’s liquidity injections helped push various markets to new highs, a pattern Hayes thinks could repeat. Jeff Park, head of alpha strategies at Bitwise Invest, shares Hayes’ view, stating that in a “world of weaker dollar and weaker US rates…risk assets in the US will fly through the roof beyond your wildest imagination.”

Hayes has made some of the most striking price predictions for Bitcoin. He forecasts that Bitcoin could reach $250,000 by 2025 if the Federal Reserve shifts toward quantitative easing. His market calls have proven accurate in recent months. Hayes correctly predicted a major correction when Bitcoin traded above $100,000 following Trump’s inauguration, a prediction many dismissed at the time.

Despite current market pressures, many analysts expect a rebound after Q2 2025, with potential for strong upward momentum in the second half of the year. The institutional landscape continues to evolve, with Grayscale filing to convert its Digital Large Cap Fund into a publicly traded spot ETF. This fund includes Bitcoin, Ethereum, and XRP, potentially giving retail investors easier access to crypto assets. Circle, the company behind the USDC stablecoin, is preparing for an IPO with advisors, expected in late April and could value Circle between $4-$5 billion. Hashgraph is also set to debut its private blockchain, HashSphere, in Q3 2025, targeting regulated industries like asset management, banking, and payment providers.