Source: Cointelegraph Original: "{title}"
On Monday (April 7), under the looming threat of Trump's tariffs, global stock markets plummeted across the board. In the Asian markets, Hong Kong fell by 13.22%, followed closely by Shenzhen and Taiwan, which dropped by 10.79% and 9.69%, respectively, while Tokyo and Shanghai fell by 7.83% and 7.34%. The smallest declines were seen in Seoul and Sydney, which fell by 5.57% and 4.12%, respectively.
The cryptocurrency market was naturally not spared either. On Monday, Bitcoin (BTC) briefly dipped below $75,000, with a decline of over 5%. This marked the first time Bitcoin had fallen below this level since November 7 of last year.
In the U.S., the S&P 500 index was nearing bear market territory, defined as a drop of over 20% from its recent peak. The tech-heavy Nasdaq Composite index had already entered bear market territory last week.
The Wall Street fear index, VIX, surged on Monday, indicating that investors were bracing for more volatility. However, after the market opened on Tuesday, some Asia-Pacific stock markets rebounded, and the cryptocurrency market also regained some ground.
According to the latest data from Gate.io, Bitcoin rose by 6.03% in the 24 hours leading up to Tuesday at 3:25 PM; Ethereum (ETH) and Solana (SOL) also recovered 7.78% and 11.21% of their losses, respectively.
At the beginning of this year, the market was generally bullish on the cryptocurrency market. However, to date, the positive news that the market had anticipated has continuously disappointed investors. Dr. Han Lin, founder and CEO of Gate.io, pointed out in an interview with Cointelegraph that the adjustment of tariff policies is primarily based on economic and trade strategic considerations, reflecting the complex changes in the current global economic situation. Although it has caused market fluctuations in the short term and indeed brought some operational pressure to certain miners, from a long-term perspective, the technological innovation in the cryptocurrency industry and its broader application across various sectors of society will become a focal point of global attention.
"I believe that in the face of the constantly changing macro environment, the cryptocurrency industry will demonstrate stronger adaptability and growth potential. Therefore, this policy direction can also be seen as an opportunity to promote industry upgrades and long-term development."
How will tariffs affect the financial and cryptocurrency markets?
The impact of tariffs on financial markets often does not follow a fixed pattern; the key lies in the differences in how they are set, the strategies announced, and the specifics of the implementation process. Additionally, the market's long-term and short-term reactions generally show significant differences.
Typically, when tariff news is released, the market may experience volatility in the short term due to panic and uncertainty, even creating downward pressure. However, this does not mean that market sentiment will remain low for an extended period. Investors' long-term attitudes depend more on whether government policy communication is clear and transparent, as well as the effectiveness and credibility of these measures when implemented.
While prices may be affected to some extent, from an overall logical perspective, the potential increase in import tariffs by the Trump administration is unlikely to have a direct impact on the use and circulation of Bitcoin itself.
One point that needs clarification is that Bitcoin is currently not a mainstream tool for global trade payments. While there are indeed specific scenarios where certain funds may use cryptocurrencies for settlement to evade sanctions or engage in illegal transactions, such behavior is an exception rather than the market norm. Therefore, even if future trade activities are hindered by tariff escalations, it is unlikely that companies will significantly reduce their use of Bitcoin, let alone see a drastic decline in Bitcoin demand.
Dr. Han Lin stated, "In the context of the ongoing changes in the global environment, short-term market fluctuations are the norm in the cryptocurrency industry, especially as recent tariff policy adjustments have indeed impacted the market. However, from a fundamental perspective, both Bitcoin and the entire cryptocurrency industry are steadily advancing in terms of technological development, global adoption, and institutional investment layout. Therefore, our positive expectations for the long-term development of the industry remain unchanged, and crypto assets will play an increasingly important role in the future global financial system."
Cryptocurrency mining may face rising cost pressures
On the mining side, mining equipment is highly dependent on imports, especially ASIC miners and GPUs from China, which dominate the global market.
When the U.S. imposes higher tariffs on Chinese tech products, the cost of imported mining machines will inevitably rise significantly, directly squeezing the profit margins of domestic miners in the U.S. and even forcing some mining operations to exit the market.
However, this does not mean that Bitcoin prices will come under pressure as a result. On the contrary, if the output of new Bitcoins slows down and the circulating supply in the market decreases, prices may actually rise. More importantly, miners in other countries can still purchase these devices at the original prices, and they may even gain a price advantage due to decreased demand in the U.S. market. The global distribution of computing power may thus undergo adjustments, but the overall market value of Bitcoin may not be harmed; rather, it could receive unexpected support.
After Trump announced tariffs on April 3, the stock prices of U.S.-listed Bitcoin miners, such as MARA Holdings and CleanSpark, plummeted in after-hours trading. Taras Kulyk, CEO of one of the largest mining machine brokers, Synteq Digital, stated that the latest tariffs will "suppress the continued growth of the industry."
MARA Holdings stock price trend over the past week. Source: Google Finance
Due to its abundant cheap energy, strong infrastructure, and greater financial strength, the U.S. has become the most important cryptocurrency mining market globally. According to statistics from December 2024, the U.S. accounts for about 36% of the global hash rate, far ahead of other countries, and along with Russia (16%), China (14%), and the UAE (3.75%), forms the basic structure of the global cryptocurrency mining market.
Currency devaluation may boost the global penetration of the cryptocurrency industry
In certain cases, trade wars and high tariffs can not only disrupt import and export trade but may also put pressure on the exchange rates of affected countries' currencies, leading to currency devaluation. At this time, cryptocurrencies often become an important choice for the public to hedge risks and preserve value.
Historically, countries like Argentina and Turkey have seen a rapid increase in demand for Bitcoin and stablecoins during periods of severe inflation and continuous currency devaluation, driving a surge in local cryptocurrency usage.
If U.S. tariff policies trigger similar economic instability, especially in emerging market countries, it is likely that more regions will adopt crypto assets as alternative tools against inflation and currency devaluation, promoting the global spread and application of cryptocurrencies.
Investment sentiment and market volatility
Risky crypto assets like Bitcoin are often the first to be affected during times of heightened global risk aversion due to their high-risk nature. As trade frictions escalate and market confidence is undermined, investors are more inclined to sell off risk assets and instead increase their holdings in traditional safe-haven tools like gold and government bonds.
The relationship between inflation, interest rates, and cryptocurrency prices
Tariff increases often mean rising costs for imported goods. Faced with higher operational pressures, companies typically pass these costs onto consumers, driving up product prices and exacerbating inflationary pressures.
To combat inflation, central banks, especially the U.S. Federal Reserve, often choose to raise interest rates. Higher interest rates not only increase borrowing costs but also mean tighter liquidity in the market, leading to decreased activity in investment capital, which in turn affects capital inflows into crypto assets.
However, there is also another possibility. When inflation spirals out of control, or even raises concerns about the credibility of fiat currencies, cryptocurrencies may become a value haven for some investors. In countries experiencing hyperinflation and severe currency devaluation, Bitcoin and other crypto assets have already been viewed as important means of preserving value.
As for the long-term impact, it depends on how strongly central banks respond to tariff-induced inflation and whether the market continues to view Bitcoin as a "digital gold" value reserve tool.
Currently, the correlation between Bitcoin and the Nasdaq index is about 40%, far below its peak of 72%. However, as we saw during the banking crisis in March 2023, Bitcoin can decouple and act as a safe haven: this is the paradox of Bitcoin; it can be an unstable asset and also a safe haven.
Related: Analysts: No country can win in a global trade war, Bitcoin (BTC) will soar as a result.
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