Bitcoin Drops Below $80K: Key Levels to Watch Amid Tariff Worries

The cryptocurrency market has been in a state of flux since President Donald Trump announced sweeping tariffs on April 3, 2025. Bitcoin, the world’s leading cryptocurrency, has seen significant volatility, dropping below $80,000 as global markets react to the new trade policies. This article will delve into the key price levels investors should monitor and the potential long-term effects of the escalating trade war on Bitcoin’s price.



Immediate Market Impact

The tariff announcements, which include a 25% levy on auto imports and a minimum 10% tariff on all foreign exports to the US, have sparked fears of a prolonged trade war. This uncertainty has led to a risk-off sentiment, with traders less incentivized to bet on more volatile assets like cryptocurrencies and tech stocks. The tech-heavy Nasdaq 100 is down 3.7% over the past 24 hours, reflecting this broader market sentiment.

Bitcoin’s price plummeted below $82,000 on April 4, 2025, facing renewed downside pressure as China retaliated against the United States with steep import tariffs. According to CoinGlass data, approximately $793.4 million worth of BTC long positions are clustered around $81,100. This means that if Bitcoin falls below the critical $81,000 support level, a much larger wave of losses could occur, potentially triggering further sell-offs.



Potential for Recovery

Despite the immediate market shock, some analysts see potential for a rebound in Bitcoin’s price. Valentin Fourner, an analyst at BRN, stated, “Despite near-term volatility, uncertainty is decreasing, and institutional buying pressure is returning. With key catalysts aligning, we expect bitcoin to rebuild momentum and make another attempt at $90,000 in the near future.” This optimism is based on the idea that as the market stabilizes, institutional investors may see Bitcoin as a hedge against economic uncertainty.

Moreover, the trade war could lead to a weakening of the US dollar, which historically has a positive impact on Bitcoin’s price. Arthur Hayes, the recently pardoned founder of BitMEX and chief investment officer at Maelstrom, noted that "the weakening of the US Dollar Index (DXY) as overseas investors continue to sell off US stocks and 'bring money home' is good for BTC and gold over the medium term." This weakening dollar could make Bitcoin more attractive as an alternative store of value.

Additionally, the trade war may prompt the Federal Reserve to implement interest rate cuts, which typically benefit risk assets like Bitcoin. Hayes also mentioned that "the two-year Treasury yield 'dumped' following the tariff announcement, signaling that markets expect the Federal Reserve to cut rates and potentially restart quantitative easing (QE) to offset the negative economic impact." Lower interest rates reduce the opportunity cost of holding non-yielding investments like Bitcoin, potentially driving up its price.

Long-Term Effects

The escalating trade war between the United States and its major trading partners, including China, has significant potential long-term effects on Bitcoin's price. Historical data and expert predictions suggest that while Bitcoin may experience short-term volatility, it could also benefit from certain macroeconomic factors in the long run.

Firstly, the trade war has led to increased market uncertainty and risk aversion, which initially caused a sell-off in risk assets, including Bitcoin. For instance, on April 3, 2025, Bitcoin's price plummeted below $82,000 amid a broader market sell-off triggered by President Trump's announcement of unprecedented trade tariffs. This volatility is evident in the $293 million in long positions and $220 million in short positions liquidated within 24 hours, reflecting panic on both sides of the trade.

However, some analysts see potential for a rebound in Bitcoin's price. Valentin Fourner, an analyst at BRN, stated, "Despite near-term volatility, uncertainty is decreasing, and institutional buying pressure is returning. With key catalysts aligning, we expect bitcoin to rebuild momentum and make another attempt at $90,000 in the near future." This optimism is based on the idea that as the market stabilizes, institutional investors may see Bitcoin as a hedge against economic uncertainty.

Moreover, the trade war could lead to a weakening of the US dollar, which historically has a positive impact on Bitcoin's price. Arthur Hayes, the recently pardoned founder of BitMEX and chief investment officer at Maelstrom, noted that "the weakening of the US Dollar Index (DXY) as overseas investors continue to sell off US stocks and 'bring money home' is good for BTC and gold over the medium term." This weakening dollar could make Bitcoin more attractive as an alternative store of value.

Additionally, the trade war may prompt the Federal Reserve to implement interest rate cuts, which typically benefit risk assets like Bitcoin. Hayes also mentioned that "the two-year Treasury yield 'dumped' following the tariff announcement, signaling that markets expect the Federal Reserve to cut rates and potentially restart quantitative easing (QE) to offset the negative economic impact." Lower interest rates reduce the opportunity cost of holding non-yielding investments like Bitcoin, potentially driving up its price.

In contrast, traditional financial markets may face more significant headwinds due to the trade war. For example, the S&P 500 has plunged 6%, setting lower closing values over the last two days of trading. The tech-heavy Nasdaq 100 is down 3.7% over the past 24 hours, and global stocks wiped out $7.46 trillion in market value based on the market cap of the S&P Global Broad Market Index. These declines highlight the direct impact of trade tensions on traditional financial markets, which are more closely tied to economic performance and corporate earnings.

Conclusion

While the escalating trade war may cause short-term volatility in Bitcoin's price, it could also present long-term opportunities due to a weakening US dollar, potential interest rate cuts, and increased institutional buying pressure. These factors may differ from the effects on traditional financial markets, which are more directly impacted by trade tensions and economic uncertainty. Investors should monitor the $81,000 support level for Bitcoin, as a breach below this level could trigger further sell-offs and liquidations. However, there is also potential for a rebound as the market adjusts to the new trade policies.