Bitcoin Holds Steady Amidst Trade War Uncertainty

Bitcoin (BTC) has maintained a steady price around $96,000 over the past 24 hours, despite a dampened market sentiment. The weekend saw limited price action, with several factors hindering market sentiment and risk appetite.

Analysts have suggested that global trade war concerns could pressure BTC and drive it towards $93,000 in the short term. Trump's tariffs have also impacted market sentiment. However, despite market sluggishness, ETF inflows have remained slow, extending a six-week streak and helping shore up the price. Talks about a strategic Bitcoin reserve have also lifted institutional demand.

The Federal Reserve is unlikely to cut interest rates, as lower US unemployment, steady wage growth, and rising consumer expectations have dampened hopes for a rate cut. Higher interest rates could raise borrowing costs and impact demand for risk assets. The prospect of higher interest rates pulled BTC down from above $100,000 to $95,700 on February 7.

US-China trade tensions have added to the uncertainty in the markets. Donald Trump's administration has announced 10% tariffs on Chinese goods, with China retaliating with its own tariffs. While BTC rebounded, uncertainty about whether the US and China could avoid a trade war remains. A full-blown trade war between the two giant economies could adversely impact global markets and influence the Fed's monetary policy. Trump's tariffs could push prices higher, raise inflationary pressure, and prompt a hawkish stance from the Fed.

A global trade war could be a double-edged sword for Bitcoin. Tariffs could increase investor uncertainty due to a negative impact on the market. However, they only pose a short-term risk for Bitcoin, according to James Wo, the founder and CEO of DFG. Trade war concerns may also increase the dollar's debasement, leading to higher inflation and driving demand for US dollar alternatives. This is what Bitcoin was originally intended for, a hedge against fiat devaluation and inflation, which might see Bitcoin ultimately benefitting from the flight away from weakened fiat currencies to push its price higher over time.

Arthur Hayes, the former CEO of Bitmex, has criticized the idea of a Bitcoin Strategic Reserve and regulatory policies regarding crypto under the Trump administration. Hayes argued that many in the crypto space mistakenly believe government intervention would benefit the industry.