Bitcoin Faces Potential Sell-Off as Trump Tariffs Loom

Bitcoin (BTC) price has been experiencing a period of relative calm, which could be disrupted by the potential reimposition of tariffs by President Trump. The U.S. Treasury Secretary recently announced that President Trump could impose tariffs in August, similar to those imposed in April. This move could potentially lead to another major sell-off for BTC price, as the last time Trump escalated the trade wars, Bitcoin and altcoins responded with heavy liquidity outflows.

Bitcoin market sentiment surged above 70 last week, signaling growing optimism and FOMO in the market. This optimism was further fueled by the price briefly pushing above $110,000, with expectations that it could potentially push to new historic highs. However, analysts and investors also noted the potential for another major pullback for BTC price, as Bitcoin funding rates dipped during the weekend, confirming the rise of bearish expectations.

The funding rates also dipped into negative territory, signaling a surge in short positions. However, this only led to higher liquidations for traders executing short positions as the price maintained upside momentum. BTC’s current momentum underscores the period of relative calm and favorable conditions. However, those conditions may soon be disrupted by the potential reimposition of tariffs.

The same calm period could potentially extend to the rest of July, during which the cryptocurrency will have a chance to push higher. However, August could potentially pave the way for another major sell-off as tariff wars make a comeback. The situation highlighted President Trump’s administration’s efforts to salvage the situation amid the latest dollar decline. The period before the tariff war resumes may allow risk-on assets like Bitcoin to push higher.

The level of spot involvement relative to derivatives activity during a rally historically revealed a lot about BTC price. That was the case during the latest rally, which was underpinned by a noteworthy surge in futures volumes on Binance. A recent analysis highlighted the significance of the ratio of spot to futures volumes on Binance based on historical data. According to the analysis, the average ratio was about 0.26 since 2019. This meant that $4 was invested in derivatives for every $1 invested in the spot segment.

The observation was consistent with the prevailing situation, which underscored a rally driven by heavy speculation. In addition, the prospects of another tariff war could potentially encourage spot investors to pull funds and support a speculative approach in the short term. Based on the analysis, it was clear that a strong resurgence in spot activity could be a solid indicator for the next major bullish breakout. Institutional flows in the next 3 or 4 weeks could also be the canary in the coal mine that will complement market sentiment.