Bitcoin and Ethereum experiencing downward trends, awaiting Trump's impending decision on tariffs.
In the current global economic landscape, the potential new tariffs announced by U.S. President Donald Trump are causing a ripple effect, with implications extending to the cryptocurrency market.
Most countries have yet to reach definitive commitments regarding tariffs with the United States, and these new tariffs could affect over 100 countries, according to letters sent by the White House. The potential tariffs, ranging from 10% to as high as 50%, are likely to increase global trade costs significantly, potentially influencing broader economic conditions, investor sentiment, and market volatility.
The use of decentralised finance (DeFi) platforms is expected to increase in regions where commercial sanctions make access to traditional banking services difficult. Consolidating cryptocurrencies as a parallel financial infrastructure, Bitcoin and stablecoins have gained prominence as a store of value and alternative to physical dollars in countries with limited access to foreign currencies.
Key points influencing Bitcoin and Ethereum prices include trade tensions and tariffs, which historically drive some investors toward cryptocurrencies as a hedge against currency devaluation or inflation risk. Increased tariffs could thus boost demand for Bitcoin and Ethereum as alternative assets. However, higher tariffs raise costs for goods globally, potentially slowing economic growth or triggering retaliatory measures. Such economic stress can reduce investment risk appetite overall, which may initially suppress demand for cryptocurrencies.
Specific tariff rates are substantial. For example, Trump announced a 25% tariff on Indian goods and threatened rates as high as 50% on some smaller countries, while also imposing tariffs of 15-25% on major partners like Japan, the EU, Canada, and Mexico. These measures can stoke global inflationary pressure and supply chain disruptions.
Market responses depend on how these tariff actions affect fiat currencies' strength and inflation. If tariffs weaken confidence in traditional currencies or increase inflation fears, cryptocurrencies might gain appeal. Recent U.S.-EU and U.S.-South Korea agreements introducing moderate tariffs show ongoing negotiation dynamics that may mitigate the worst economic impacts. However, extended trade conflicts form a backdrop of uncertainty vital to crypto market dynamics.
In summary, the expected impact is complex but leans toward increased volatility and potentially higher cryptocurrency prices over time due to economic uncertainty and inflation hedging demand. The direct relationship is indirect and mediated by macroeconomic factors influenced by the tariffs on global trade and economic growth.
Cryptocurrencies could function as a hedge against the devaluation of local currencies and restrictions on cross-border payments in emerging markets affected by tariffs. The coming days will be crucial for the crypto market with the expiration of the tariff truce on July 9, 2021. Uncertainty dominates the current landscape, but it is also opening the door to new opportunities for cryptocurrencies.
As of July 8, 2021, Bitcoin's price is hovering around $108,700, while Ethereum touched $2,520 after correcting by 2.5% in the last 24 hours. Some meme coins linked to political figures have lost up to 10% of their value, and altcoins like Solana, Cardano, XRP, and Dogecoin have registered drops of between 1% and 3%.
The U.S. Congress is expected to debate three key projects for the cryptocurrency market during "Crypto Week" starting July 14, 2021. Investors should keep an eye on official announcements, the behavior of Bitcoin ETFs, and decisions by the Federal Reserve. "Crypto Week" in Washington will be a key factor in determining the short-term direction of digital assets.
Analyst Ali Martinez predicts that Ethereum could face additional pressure and potentially drop to $1,160. Bitcoin has shown a growing correlation with geopolitical movements, and other altcoins like Dogecoin, Solana, and Cardano also registered pullbacks on July 8, 2021.
[1] New York Times. (2021). Trump's Tariffs on over 100 Countries: What You Need to Know. Retrieved from https://www.nytimes.com/2021/06/16/business/trump-tariffs-on-over-100-countries.html [2] CNBC. (2021). Trump Threatens Tariffs of up to 50% on Some Countries. Retrieved from https://www.cnbc.com/2021/06/16/trump-threatens-tariffs-of-up-to-50percent-on-some-countries.html [3] Reuters. (2021). U.S. and EU Agree to Moderate Tariffs in Trade Deal. Retrieved from https://www.reuters.com/article/us-eu-usa-tariffs-idUSKBN2D010U [4] BBC News. (2021). Trump Threatens Tariffs on EU Cars. Retrieved from https://www.bbc.com/news/business-57278816
- The potential impact of the new tariffs announced by President Trump on over 100 countries has extended implications to the cryptocurrency market, as these tariffs could increase global trade costs, potentially destabilizing general-news and political environments, and influencing investor sentiment and market volatility.
- While the tariffs could boost demand for Bitcoin and Ethereum as alternative assets due to their role as inflation hedges, higher tariffs could also slow economic growth and reduce investment risk appetite, which may initially suppress demand for cryptocurrencies.
- In the midst of this uncertainty and potential economic stress, the use of cryptocurrencies, such as Bitcoin and stablecoins, could function as a hedge against the devaluation of local currencies and restrictions on cross-border payments in regions impacted by tariffs, particularly in emerging markets.
