Crypto markets recoil in the wake of Liberation Day tariffs

Major cryptocurrencies like Bitcoin, Solana, and Ethereum have dropped following Trump’s Liberation Day tariffs announcement. However, analysts believe a crypto rally could be on the horizon.

On April 4, President Donald Trump announced that the United States is invoking at least a 10% tariff on all imported goods that come into the country. The announcement shook up global markets leading to major stocks plunging to some of its lowest levels since 2022.

Investors have grown weary that Trump’s new trade policies could spark a rise in consumer prices, signaling the beginnings of a recession.

Odds on Polymarket betting that the U.S. will experience a recession in 2025 have mostly placed their money on YES, with odds surging to 53% both before and after tariffs were unveiled.

Despite being hailed as safe haven assets in the face of global economic uncertainty, the crypto market did not escape unscathed from the spillover effect of Trump’s tariffs.

The overall crypto market cap has fallen by 2.6% following Trump’s tariff announcement. Many cryptocurrencies actually saw brief spikes as investors reacted to Trump’s speech, but as the details of the new tariffs became clear, market sentiment quickly turned negative.

Shortly after the announcement, Bitcoin (BTC) fell by nearly 4%. Its value that stayed barely above $80,000, recovering slightly by 0.03% to $83,210.

On the other hand, Ethereum (ETH) suffered a worse drop of 5.2% after Trump’s announcement. At press time, ETH has fallen by 1.24% and is currently trading hands by $1,801.

Solana’s price also declined by nearly 3% after the tariffs announcement. SOL (SOL) has since recovered slightly, only falling by 1.9% in the past 24 hours. The token is currently valued at $116.24. Just a day prior, it was still trading within the $119 to $118 price range, plunging since.

Despite the market volatility among crypto assets, analysts believe that tariffs could bring about another crypto rally.

How can tariffs make or break the crypto market?

Although things are looking bleak on the crypto market after Trump’s tariff announcement, experts believe that once the initial shock wears off, cryptocurrencies could see a long-term rally in the wake of the economic uncertainty in traditional markets due to the tariffs.

If the tariffs end up pushing the economy toward a recession, the Federal Reserve could potentially lower interest rates or even quantitative easing that would inject liquidity into the financial system. A boost in global liquidity could bring about a rise in investor appetite for risk assets, such as Bitcoin and other cryptocurrencies.

So far, investors have flocked to the more traditional safe haven asset, such as gold. Following Trump’s Liberation Day tariffs, gold soared near its all-time high. Spot gold hit record high of $3,148.88 per ounce on Tuesday. However, it later retreated to $3,110 after there were reports that precious metals would be excluded from Trump’s tariffs.

With traditional markets like stocks and bonds are in turbulence due to heightened trade tensions, investors may gravitate towards alternative assets as a hedge against inflation and economic uncertainty.

BitMEX co-founder and renowned crypto analyst, Arthur Hayes, explained how tariffs could prove beneficial to the crypto market in his recent post. He expected the global imbalance will be corrected and that fiat currencies would weaken. The weakening of traditional currencies like the dollar and the yuan could prove to be a boost for Bitcoin.

“The $ [dollar] is weakening alongside foreigners selling U.S. tech stocks and bringing money home. This is good for BTC and gold over medium term,” said Hayes in his post.

In contrast, Bitfinex analysts warned traders that the tariffs reveal could lead to a deeper correction in the crypto market. Before Trump’s tariff announcement, Bitfinex said to crypto.news that if the tariffs stayed within the 12-20% range, markets could react positively and crypto may even see a brief rally.

However, because the tariffs deployed by Trump have exceeded this range, Bitfinex analysts predict there will be renewed de-risking.

“We could see a continuation of the downtrend that’s played out since February,” said analysts.