Bitcoin Drops 6% to $81,400 as Trump Tariffs Spark Market Sell-Off

Arthur Hayes, co-founder of BitMEX, asserted that the tariffs planned by former U.S. President Donald Trump could serve as a positive catalyst for Bitcoin's price. Hayes argued that these tariffs would compel governments and central banks to increase money printing in response to economic disruptions, which in turn would drive investors towards Bitcoin. While this scenario could play out in the mid-term, strained markets may experience more selling before Bitcoin's price surges higher.

Hayes explained that the liquidity boost from increased money printing would make Bitcoin an attractive investment, ultimately fueling its growth. This perspective contrasts with the prevailing bearish sentiment among investors. In a follow-up statement, Hayes highlighted the potential impact of Trump’s tariffs on the Japanese economy, suggesting that the Bank of Japan would need to inject liquidity to counter the effects of the tariffs. He predicted that the USDJPY exchange rate could rise to 160, creating trading opportunities for investors.

Hayes also suggested that Trump’s tariff policy was a deliberate attempt to address global trade imbalances. He believed that tariffs could disrupt international trade, discouraging foreigners from acquiring U.S. Treasury bonds. According to Hayes, the Federal Reserve and the U.S. banking system would need to intervene to maintain the stability of the Treasury market, necessitating an increase in the money supply. Hayes noted that if Bitcoin could hold the $76,500 mark until April 15, U.S. tax day, the Bitcoin market would have avoided some negative circumstances.

Bitcoin's status as "digital gold" and a hedge against inflation has been challenged recently, as its price actions somewhat mirror stock markets. When stocks fall due to increased macro uncertainty, Bitcoin also declines. On Thursday, U.S. stock indices plummeted following Trump’s tariff announcement, erasing over $2 trillion in the U.S. stock market. The S&P 500 fell 4.8%, its largest one-day drop since June 2020, while the Nasdaq Composite declined 6%, its worst day since March 2020. The Dow Jones Industrial Average dropped by 3.6%, and the Russell 2000 index fell by 6.6%, entering a bear market after losing more than 20% from its late-November highs.

Bitcoin also faced selling pressure, falling around 6% to $81,400 post-tariff announcement as investors turned risk-averse. However, this decline was relatively muted compared to previous market reactions to Trump’s tariff signals. The flagship cryptocurrency has shown stronger resilience during renewed market turbulence, with prices staying above $84,000. Michael Saylor, Strategy’s Executive Chairman, explained that Bitcoin faces selling pressure during market turmoil due to its liquidity and availability. When markets panic, investors sell assets they can easily liquidate to raise cash, and Bitcoin fits that description. Saylor asserted that this short-term correlation doesn’t indicate a long-term trend, believing that Bitcoin’s fundamental value proposition could eventually lead to it decoupling from other risk assets.

As Bitcoin rebounds, altcoins start recovering. Data shows that Ether is back above $1,800, while XRP stays above $2. The total cryptocurrency market cap currently sits at around $2.8 trillion. Institutional demand appears to have waned, with spot Bitcoin ETFs reporting net outflows on April 3, reversing their positive performance from the previous day. Despite the pullback, large investors are likely to use market weakness as an opportunity to buy.