US President Donald Trump’s tariffs are predicted to have a long-term effect on Bitcoin (BTC) prices, causing them to rise significantly. This is due to the weakening of the US dollar in global currency markets and lower yields on US government securities, as stated by Jeff Park, head of alpha strategies at financial services firm BitWise.
According to Park, the purpose of implementing tariffs is to weaken the US dollar in international trade, in order to address trade imbalances and make US exports more appealing. Park also referred to this as the “Plaza Accord 2.0”, making a comparison to a 1985 agreement involving the United States, Japan, West Germany, France, and the UK, which aimed to weaken the US dollar.
Park further explained that the tariffs will lead to increased inflation, which will have a disproportionate impact on US trading partners. This will result in a global currency devaluation, leading citizens in those countries to seek alternative assets for storing value, such as Bitcoin.
Despite the optimistic long-term outlook, the recent announcement of tariffs by President Trump on Canada, China, and Mexico had a negative impact on the crypto markets. Over the past seven days, the price of Bitcoin decreased by approximately 7.2%, while other cryptocurrencies experienced even greater losses.
Altcoins, including Ether (ETH), SOL (SOL), and XRP (XRP), saw declines of around 11.6%, 19.3%, and 16.6% respectively. Investors are concerned that the trade war may lead to increased inflation in the near future and have therefore turned to risk-off assets as a hedge against macroeconomic uncertainty.
In the short term, the US dollar has shown strength, as indicated by the US Dollar Currency Index (DXY), which measures its performance against other fiat currencies. Although there was a slight pullback in January, the US dollar has since regained some of its strength in the first few days of February.
The rising US dollar and increasing US dollar yields may pose challenges for the short-term price of Bitcoin and other risk-on assets, as investors shift their focus to safer investments, such as US government securities.
Please note that this article does not provide investment advice or recommendations. Every investment and trading decision involves risks, and readers should conduct their own research before making any decisions.