Trump's Tariffs Spark Crypto Sell-off, Bitcoin Bulls Unfazed

Cryptocurrency markets witnessed a sharp sell-off following U.S. President Donald Trump's tariffs on China, Canada, and Mexico, but several analysts remain bullish on Bitcoin's long-term prospects. Jeff Park, head of alpha strategies at Bitwise, believes that the tariffs will weaken the U.S. dollar and lower yields on U.S. government securities, propelling Bitcoin "violently higher." He considers this his "highest conviction macro trade for the year."

Bitcoin (BTC) fell to the bottom of its $90,000 to $109,588 range on Feb. 3 but recovered sharply, indicating solid buying at lower levels. Several altcoins that experienced a brutal sell-off of more than 20% within 24 hours also staged a strong comeback. One of the factors supporting Bitcoin's price has been the sustained demand from U.S. spot Bitcoin exchange-traded funds (ETFs). Bitwise investment chief Matt Hougan highlighted that spot Bitcoin ETFs attracted $4.94 billion inflows in January, suggesting that the total inflows for the year could be more than $50 billion, much higher than the $35.2 billion inflows seen in 2021.

The S&P 500 Index (SPX) turned down from the overhead resistance of 6,128 on Jan. 31, indicating that the bears are fiercely defending the level. The index gapped down on Feb. 3, signaling sustained selling pressure from the bears, but the lower levels are attracting buyers. If the price closes below the moving averages, the index could slide to the 5,853 support. Buyers are expected to fiercely defend the 5,853 to 5,773 zone because a break below it could start a deeper correction. If the price turns up from the current level and rises above the moving averages, it will suggest that the index may rally toward the overhead resistance at 6,128.

The U.S. Dollar Index (DXY) turned up from 107 on Jan. 27 and rose back above the 20-day exponential moving average (108.29) on Jan. 31. The index accelerated on Feb. 3, but the bulls could not clear the overhead hurdle at 110.