Trump’s Tariff War Will Ultimately Benefit Bitcoin

The cryptocurrency market has seen a significant decline in recent days, with Bitcoin falling about 5%, and many other assets experiencing even larger declines. When I was writing this on Monday morning in London (where I was attending a conference), Ethereum had dropped 17%, Solana 8%, and XRP 18%.
The immediate cause of this decline is the concern about the global trade war. Over the weekend, President Trump imposed a 25% tariff on most imports from Canada and Mexico and a 10% tariff on imports from China. These three countries have announced their corresponding response plans. This move has caused the US dollar to rise by more than 1% against other major currencies and has led to a significant drop in stock futures and cryptocurrency prices.
Of course, since this is the crypto technology area, the trouble doesn’t stop there.
In the cryptocurrency sector, due to the widespread use of leverage, sharp market fluctuations (especially on weekends with low liquidity) tend to intensify themselves. Negative news events lead to price declines, which cause leveraged traders to close their positions by selling, thereby causing prices to keep falling and forcing more people to close their positions. This process continues until the leverage is exhausted.
Sure enough, within 24 hours from Sunday night to Monday morning, the largest liquidation event in the history of cryptocurrencies occurred, with possibly up to $10 billion in leveraged positions being liquidated.
Bitwise investors tend to be long-term investors, so these short-term, leverage-driven pullbacks are regarded by most as opportunities rather than threats - as long as the news events are indeed short-lived.
So, is that really the case? This is a trillion-dollar question.
My colleague Jeff Park, who leads Bitwise’s Alpha team, is one of the sharpest minds at the intersection of macro and cryptocurrency. His view is that Trump’s economic game plan, including the implementation of tariffs, is actually a long-term positive catalyst for Bitcoin.
Now let’s have Jeff share his views:
The result is: Bitcoin wins, and fiat currency loses. In either case, Bitcoin will go up.
To understand the long-term impact of tariffs on Bitcoin, two things need to be remembered: 1) The curse of the "Triffin Dilemma", 2) President Trump’s long-term goals.
First, the "Triffin Dilemma". Named after the Belgian-American economist who proposed this concept in the 1960s, it refers to the fact that being the world’s reserve currency has both advantages and disadvantages.
From a negative perspective, the US dollar is structurally overvalued because other countries need to hold it as a reserve currency (regardless of its price), and the United States must have a persistent trade deficit to supply the world with dollars. From a positive perspective, the US government can continuously borrow at a lower cost than it "should" because there are continuous buyers of its debt.
Trump hopes to eliminate the negative factors and retain the positive ones.
How does Trump plan to achieve this goal? Through tariffs.
Tariffs are usually a temporary negotiation tool used to achieve certain goals - and that seems to be the case this time. We believe that the ultimate goal is to reach a multilateral agreement to weaken the US dollar without increasing long-term interest rates. A feasible way is to force countries to reduce their dollar reserves while extending the maturity of government bonds. This will hold down long-term interest rates and support the US manufacturing base.
But how do you get countries to agree to this? You have to force them to the negotiating table.

The United States has done this before. In 1985, West Germany, France, the United Kingdom, and Japan signed the famous "Plaza Accord", requiring an orderly depreciation of the US dollar against other currencies. This agreement greatly boosted US manufacturers because they had great difficulties in competing on the global stage due to the strong US dollar before. (Why did these countries sign the agreement? One of the reasons is - you guessed it - the fear of tariffs.)
If Trump can achieve this result by bullying, then there is no asset more beneficial than Bitcoin. Lower interest rates will stimulate US investors' risk appetite and push up the price of Bitcoin. Abroad, countries will face economic weakness and will adopt traditional economic stimulus measures to make up for it, thus pushing up the price of Bitcoin again.
What if he fails? What if we encounter a continuous tariff war? We firmly believe that the resulting economic weakness will lead to money printing on a larger scale than ever before. Historically, this kind of stimulus has been very beneficial to Bitcoin.