Are Trump's Tariffs Tanking Crypto?

Key Points

• Trump's tariffs have jolted markets and sparked lots of new volatility in crypto.

• Long-term holders can use any tariff-induced dips to accumulate more coins.

• The biggest risks here are consistent dents to sentiment and higher uncertainty.

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The word "tariff" has a habit of making investors wince in anticipatory pain. President Donald Trump's chaotic attempts at implementing these sweeping new import taxes have yanked the market's attention around repeatedly this year.

Crypto holders, long accustomed to wild price swings but now under new pressure, suddenly find themselves forced to confront trade policy in ways that they never had to before. Are these tariffs killing the crypto bull market, or merely adding even more raucous noise to an already rowdy asset class?

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Trump's tariff turbulence taunts the tenacious

The first salvo of the tariff saga landed on April 2 when the White House signaled "Liberation Day" duties on 70 of the U.S.'s major trading partners; Bitcoin (CRYPTO: BTC) slipped roughly 3.1% while the S&P 500 lost 1.8% that day.

The sell-off looked dramatic on crypto charts, yet by April 4 Bitcoin was already clawing back ground, underscoring how quickly traders dismiss policy headlines. Now, it's up by 21% during the past six months.

So, for long-term-oriented crypto investors who simply ignored the news and held steady, the impact was minimal, and those who took advantage and bought the dip ended up slightly better off than those who remained on the sidelines waiting for the uncertainty to pass.

Still, the threat of more tariffs being imposed, as well as the potential positive catalysts of trade deals being signed, slammed sentiment in the markets, including crypto, from bullish to bearish and back again, hampering investors and businesses attempting to develop long-term plans.

Fast-forward to this week, when another tariff wave is set to hit on Aug. 7, lifting the average U.S. import tax rate to 18.3%, the highest since the 1930s. Bitcoin briefly fell to $114,000 before rebounding, with Ethereum (CRYPTO: ETH) mirroring that pattern. The net result thus looks to be basically the same as before, with a lot more volatility, minimal ability to chart a sensible course forward, but no structural break in the uptrend.

That dynamic may be fragile if the uncertainty continues, however.

U.S. Bitcoin miners import most of their mining hardware from China, Thailand, Malaysia, and Indonesia. A tariff as high as 36% on those machines (as part of the tariffs on those countries) would raise the capital expenditure needs of miners, thereby lengthening the time it takes for miners to recoup their investment. But if miners have less supply to offload to the market because they're stingy with investments, that would probably force the price of Bitcoin higher at a faster pace, not lower.

At the same time, crypto exchanges have zero tariff exposure, and protocol economics are untouched. In short, this seems to be a case where headline-related risks are greater than real balance sheet risks.

Sentiment spillover is by far the biggest problem here

Where tariffs bite hardest is investors' psychology.

Persistent policy uncertainty could shave away real investment by 2026, with Trump's trade salvos as a top culprit. In short, businesses, similarly to Bitcoin miners, will be loath to invest until they can develop a coherent view of the near future, and that also means they will be hesitant to take risks. And when risk appetite retreats, crypto usually feels the draft.

In the 48 hours after the latest tariff schedule was reported, Bitcoin exchange-traded funds (ETFs) saw nearly $1 billion in outflows, their worst two-day stretch since launch. Of course, those outflows will likely be outmatched by even larger inflows once the immediate shock of an impromptu policy change fades. After all, so far, there is not any firm evidence that Trump's tariffs are actually affecting cryptocurrencies in any material way, as crypto tokens can move freely across international borders and aren't covered by the administration's trade policies anyway.

Therefore, the tariffs do not change crypto's core math, at least not right now as they are currently envisioned and implemented.

Bitcoin's next halving is expected in April 2028, and it will again cut new supply in half. Ethereum's technology platform won't stop becoming more sophisticated in creating and administering smart contracts, nor will tariffs affect its status as the home of decentralized finance (DeFi) on the blockchain. Put differently, all of those fundamental properties have nothing to do with steel quotas or French wine duties.

For investors, that means treating tariff-driven dips in crypto the same way one treats any macro wobble. They're opportunities to build up your positions intended for multiyear holding horizons.

Assuming tariffs stay elevated, capital may remain skittish, and prices may grind sideways or even lower. Widespread panic is always a possibility if there's a major change that is seen as detrimental.

Nonetheless, history favors disciplined buyers when fear overrides fundamentals, and now is the time to stay especially cool-headed.

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Alex Carchidi has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.