Bitcoin’s Trump rally gives way to risk asset capitulation on heightened trade war fears

Donald Trump’s “Liberation Day” – the culmination of his efforts to restructure the US economy and global trade – sparked a sharp global market sell-off that engulfed global equity markets and Bitcoin, as bonds rallied, in a fast-escalating trade war crisis. Blanket tariffs were imposed on nearly all US imports, on top of higher “reciprocal tariffs” on around 60 countries amounting to the most sweeping US trade action in a century.

Bitcoin has tumbled almost 16% to under $75,000 since Trump’s tariffs were announced on 2 April, while Ethereum, the second largest cryptocurrency, fell 26% to under $1,450. Since Bitcoin’s all time high on Trump’s inauguration day (20 January), Bitcoin has plunged 31.7% peak to trough, while Ethereum has collapsed 58% over the same period, and 65% since its own peak in mid-December. By comparison, the S&P 500 has dived more than 16% since Trump’s tariffs were announced. Bitcoin’s price action continues to behave like a high-beta risk asset rather than a true macro hedge as many had hoped.

Trump has signalled that no policy changes are planned to address the market selloff. China faces the steepest tariff burden, with total duties on select goods reaching as high as 54%, while the EU and Japan will be hit with 20% and 24% tariffs, respectively. The UK will incur only the baseline 10%, and Canada and Mexico were largely spared under USMCA exemptions. Trump’s tariffs are projected to raise around $700 billion in revenue, which the administration says will fund domestic tax cuts and industrial incentives.

Investors are recalibrating risk appetite amid rising stagflation fears. Capital Economics forecast annual CPI inflation could surge back above 4% while GDP growth expectations were cut to 1.5%. Higher inflation and slower growth place the Federal Reserve in a policy dilemma which will likely leave them on hold in the near-term, sapping risk appetite for Bitcoin and crypto. 

Bitcoin’s frenetic price rally following Donald Trump and the Republicans’ sweeping win in last autumn’s US presidential elections culminated in a ‘double top’ that peaked on inauguration day at around $109,000. Emblematic of classic crypto euphoria, Trump associates launched $TRUMP meme coin three days prior, which rocketed 650% in a little over 24 hours. With hindsight, it was a classic top signal.

Whether it was a macro or mid-cycle top for Bitcoin remains to be seen, but the price action in the two and a half months since Trump’s return to the White House has been sideways chop and down. Bitcoin peaked on inauguration day at $109,369, completing a double top that had begun forming after the election. From its 2022 cycle low, Bitcoin rose six-fold in just over two years, peaking on optimism that Trump’s return and a unified Republican government would deliver regulatory clarity and institutional tailwinds. But in less than three months, Trump’s return has dampened risk appetite globally through sweeping global tariffs. But it is the signal behind the tariff noise that may be the most significant for Bitcoin’s price evolution – and institutional adoption – from here. Parsing the signal from the noise in Trump’s economic policy, and what it means for risk assets like Bitcoin in the near-term, is highly significant for investors. But whatever extent Bitcoin’s price trajectory is caught in the crossfire of the Trump administration’s economic policy is immaterial to Bitcoin’s own long-term future as a permissionless and borderless store of value.

Trump’s economic policy foreshadows gloomy outlook for risk assets

Trump’s economic policy will likely set the course for the global economy and risk appetite over the coming months, and possibly years, which will engulf Bitcoin and broader crypto markets. Understanding policy objectives is therefore important.

At its core, Trump’s economic policy framework centres on the premise that the US must shrink the size of the federal government workforce, its $30 trillion federal deficit, and stimulate private-sector-led growth – while avoiding recession, restoring affordability, and reinvigorating the US middle class. The administration aims to blend fiscal consolidation with deregulation. Tariffs and industrial policy are tools to rebuild and promote domestic manufacturing capacity through global trade realignment. According to Treasury Secretary Scott Bessent, the goal is to lift GDP growth to 3%, cut inflation, and restore real wage gains without increasing spending.

But the road to Trump’s promised land is fraught with danger. Fiscal tightening, government deleveraging, and regulatory rollbacks are already fuelling uncertainty. The S&P 500 has shed over 10% in six weeks, while Bitcoin has plunged 30%. The disinflationary drag from spending cuts, elevated debt servicing costs, and tariff shocks could suppress consumer demand, slow investment, and increase unemployment in government-reliant sectors before any long-term gains materialise. Markets may remain in ‘risk-off’ mode long after policy clarity arrives. Execution risk is high, and poorly timed reforms could deepen the downturn. Trump’s Liberation Day may not be the clearing event investors were hoping for, but rather the start of a protracted volatile adjustment phase.

Mixed signals from the administration

In the early days of his second term, Trump signed an executive order banning a central bank digital currency (CBDC), appeasing crypto advocates who view sovereign digital money as fundamentally incompatible with permissionless systems, privacy, and sovereignty. On 7 March, the White House hosted a Crypto Summit to underscore the administration’s ambition to make the US the world’s digital asset capital. On the same day, Trump signed a second executive order launching a Strategic Bitcoin Reserve (SBR) and digital assets stockpile. This was initially met with scepticism, as markets digested the implications of increased federal centralised ownership of digital assets. It was subsequently confirmed that the SBR would be limited to consolidating existing federal ownership of Bitcoin and certain other digital assets seized as part of criminal or civil asset forfeiture proceedings and held rather than sold. In addition, “budget-neutral strategies” for acquiring additional bitcoin will be considered, provided they impose no incremental costs on American taxpayers. In practice, that means no buying programme and no legislative follow-through, rendering the SBR more of a symbolic gesture than a serious fiscal commitment.

Elsewhere, the SEC has softened its stance under new Chair Paul Atkins, marking a sharp departure from the enforcement-heavy approach of Gary Gensler. Since January, the SEC has dismissed several high-profile lawsuits, including settling its long-running case against Ripple, actions targeting a number of altcoins for alleged securities violations, and lawsuits against Coinbase and Kraken, the US crypto exchanges. While regulatory posture has shifted, institutional adoption remains more of a slow burner. Abu Dhabi’s Mubadala Investment Company has taken a more direct approach, investing $436 million in BlackRock’s iShares Bitcoin ETF (IBIT), per SEC filings – making the SWF the seventh-largest shareholder. However, most corporates and funds are still constrained by volatility, sustainability concerns, regulatory flux, and more recently, the broader risk-off environment triggered by Trump’s trade reset

For now, Trump’s second term may define Bitcoin’s short-term volatility far more than its long-term destiny, with the structural realignment in the US economy and global trade now underway being more of a risk event than a catalyst.

At BTG Advisory, we are well placed to guide companies across crypto due diligence, and treasury management. Contact us today to discuss how we can help you navigate this evolving market with confidence.