Conflict Arises Between Two Trump-Era Crypto Policies, Potentially Jeopardizing the Bitcoin Rally
With contrasting crypto strategies from President Trump stirring up the market, Bitcoin investors are bracing for a potentially volatile quarter. The trajectory of Bitcoin’s value looks uncertain, having seen its steepest decrease since last September amidst the unease sparked by President-elect Trump’s tariff strategies and the unexpected rise in payroll figures, contributing to higher bond yields and a bolstered dollar. While the surge in crypto markets post-election had subsided by December 2024, the community remained hopeful as 2025 began, buoyed by the prospect of supportive crypto policies from both Congress and the White House, which appeared to eclipse concerns linked to the broader economic landscape. Yet caution remains, for the early days of Trump’s administration may bring additional dips in Bitcoin values before any new records are pursued. Although a pro-crypto stance may be upheld throughout the year, certain facets of Trump’s policies might impede crypto prices in the short term.
“The current challenge for Bitcoin lies with the strong dollar,” remarks Zach Pandl of Grayscale Investments. He attributes the recent downturn in Bitcoin partly to the fed’s indication of a more conservative approach to rate cuts, but likewise stresses the market’s realization that not all aspects of the Trump administration’s policies will favor Bitcoin, particularly with tariffs introducing an added element of unpredictability.
Early in the week, Bitcoin’s value reacted positively to hints of limited tariff plans from a Washington Post report. But the situation grew more complex as Trump considered declaring a state of emergency to impose more extensive tariff regulations. Subsequently, the dollar’s value escalated as Treasury yields hit a 14-month peak by Friday.
“Since the Federal Reserve’s hawkish cut in December, those engaged in the market have displayed heightened sensitivity to strong economic data,” noted Alex Thorn from Galaxy Digital, suggesting that uncertainty concerning Trump’s trade and tariff decisions could inject volatility into risk assets in the short term, despite enduring supportive structures for Bitcoin and other digital assets.
Bitcoin’s price movement often mirrors or diverges from stocks and gold, but two more stable correlations are observed: it is on an upward trend with the increase in global liquidity (as seen in the M2 money supply), and on the downward trend concerning the dollar index. Crypto and blockchain analyst Mike Colonnese of H.C. Wainwright observed a decline in the M2 since October, surmising that Bitcoin might fall back to mid-$70,000s within the quarter. JPMorgan’s Kenneth Worthington has also highlighted that progress on Capitol Hill is slow, meaning any advantageous policy changes might only become apparent by year-end.
“The coming months will be dominated by macroeconomic factors, given that Congress will initially focus on matters other than crypto,” suggests Pandl. Yet, he remains optimistic about forthcoming crypto legislation, specifically in areas of stablecoins and market infrastructure, although he foresees significant non-crypto topics, such as immigration, taxes, and tariffs, being prioritized.
Post-election, Bitcoin experienced a more than 45% increase as a result of Trump’s crypto-friendly positions and the industry’s million-dollar efforts to establish a pro-crypto Congress. “The notion of having a crypto-sympathetic Congress and legislative environment is encouraging for the asset class,” Pandl concluded. Despite this, certain tenets of the Trump policy could also enhance the dollar, adding a layer of complexity to market risk with tariffs as a prime example.
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