Trump’s Trade Tariffs Trigger Bitcoin Slump as Recession Fear Rises

Bitcoin Prices Drop Following Trump's Trade Tariffs as Markets Anticipate Fed Rate Cuts

  • Bitcoin prices have fallen following Trump’s announcement of new global trade tariffs, which has increased recession fears.
  • Traders are now betting on Federal Reserve interest rate cuts as early as June, with markets showing a 70% probability.
  • Some analysts believe the potential Fed response could actually drive Bitcoin to significant gains by year-end.

Cryptocurrency prices have dropped after President Donald Trump implemented his promised "Liberation Day" trade tariffs on Wednesday. Trump’s announcement, which includes a 10% tariff on most imported goods to the United States and higher duties on dozens of countries, has rattled markets and impacted Bitcoin’s recent upward momentum.

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The Bitcoin Price retreated after climbing prior to Trump’s tariff proclamation as traders rushed to understand the implications of these so-called reciprocal tariffs. According to Reuters reporting, short-term interest-rate futures now show a 70% probability of Federal Reserve interest rate cuts at its June meeting, up from approximately 60% before the tariff announcement.

Trump’s trade actions have significantly increased recession concerns, with prediction markets Polymarket and Kalshi now showing the probability of a U.S. economic downturn at over 50%. "Remember—tariffs are dovish, and big tariffs are very dovish," noted Joseph Wang, who operates the research portal Fedguy.com, in a post on X.

Fed Rate Cuts and Bitcoin’s Outlook

The market reaction suggests traders believe the Federal Reserve will need to restart its interest rate cutting cycle this summer, potentially delivering three quarter-point reductions by October. This shift represents a significant change in monetary policy expectations that could impact cryptocurrency markets.

Arthur Hayes, co-founder of crypto derivatives platform Bitmex, remains bullish despite the market turbulence. In a blog post, Hayes wrote: "I still believe bitcoin can hit $250,000 by year-end because now that the [U.S. Treasury secretary Scott Bessent] has put [Fed chair Jerome] Powell in his place, the Fed will flood the market with dollars."

The connection between interest rates and Bitcoin has historical precedent. Last September, the Fed’s unexpected 50 basis point interest rate cut helped fuel a Bitcoin price rally that continued through Trump’s November election victory.

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Potential Recession as Bitcoin Catalyst

Federal Reserve Chair Jerome Powell has recently warned that recession risks are increasing, something that BlackRock‘s head of bitcoin and crypto operations has previously described as a potential "big catalyst" for Bitcoin prices.

Hayes maintains an optimistic view, stating: "If I had to place a bet on whether I thought bitcoin would hit $76,500 or $110,000 first, I would bet on the latter." His analysis suggests Bitcoin reached a local low of $76,500 last month and is now positioned for significant gains, particularly if the Fed pivots from quantitative tightening to quantitative easing.

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