Bitcoin May Benefit From Trade Wars as Investors Seek Alternatives To Avoid Volatility in Traditional Markets

Key Takeaways

• Trump’s policies, while aiming for a weaker dollar to boost exports, could inadvertently strengthen it.
• Tariffs raise consumer costs and inflation, pushing investors to seek assets, like Bitcoin, to avoid traditional market volatility.
• Bitcoin’s future looks uncertain but promising.

Trump’s Dollar Dilemma

While Trump prefers a weaker exchange rate to boost U.S. exports and reduce the trade deficit, his policies will likely strengthen the already expensive dollar. This could amplify global financial instability.

The dollar’s value has historically mirrored shifts in global economic momentum. After a post-2001 decline, it strengthened post-2011 due to European and Chinese economic weaknesses. This is a trend that could persist under Trump’s policies.

Michael Klein Senior Research Fellow, Global Economy and Finance Programme David Lubin  believes that tariffs are expected to bolster the dollar further as they pressure trading partners’ currencies to depreciate. Additionally, Trump’s likely fiscal expansion and tighter monetary policy point to sustained dollar strength.

A stronger dollar may hinder global trade, limit developing countries’ financial access and complicate inflation control for weaker currencies. If it becomes overvalued, chaotic adjustments, such as sudden market shifts or aggressive U.S. intervention, could ensue.

For Lubin, Trump’s administration may overlook these risks, viewing the dollar’s decline as a potential benefit. However, whether strong or weakened chaotically, an overvalued dollar under Trump’s leadership could spell trouble for the global economy.

Bitcoin May Emerge as the Real Winner

Tariffs raise import taxes to protect local industries, making imported goods more expensive and reducing their volume. While this benefits domestic businesses, it increases consumer costs and inflation.

Additionally, trade tensions and uncertainty caused by tariffs can affect currencies. For example, the U.S. dollar rose by 0.4%, following Trump’s tariff announcement. At the same time, the currencies of affected countries, like China, Canada, and Mexico, weakened.

Historically, inflation and trade tensions, such as the U.S.-China trade war , have driven investors to seek alternatives like Bitcoin to avoid volatility in traditional markets.

Often viewed as a “safe-haven” asset, Bitcoin tends to rise in value during economic uncertainty. This happened between 2018 and 2020 when the trade war spurred an increased interest in cryptocurrency.

In the case of a U.S.-China trade war, it’s relevant to note that the actions of the Chinese state and investors still significantly impacted Bitcoin’s price.

Ongoing trade disputes could lead to inflation, which may hurt Bitcoin in the short term. However, it may boost its long-term value as a hedge against dollar debasement.

Bitcoin miners could face higher costs due to increased tariffs on Chinese semiconductor imports, impacting mining operations and Bitcoin’s market dynamics.

The rise of Hong Kong-based Bitcoin ETFs also marks a growing “battle of jurisdictions” for Bitcoin custody, which may influence Bitcoin’s price but erode its privacy features.

In a worst-case scenario, escalating U.S.-China tensions could cause significant short-term price drops for Bitcoin, as seen in previous geopolitical crises. However, Bitcoin’s principles of self-custody and its role as a store of value could make it more attractive during long-term economic and geopolitical instability.

Bitcoin’s Future in 2025 Is Uncertain but Promising

Trump’s re-election has triggered a rally in Bitcoin , with many optimistic about its prospects in 2025. Bitcoin’s recent resurgence follows the “ crypto winter ” of 2021-2022, when it dropped below $20,000.

However, volatility remains a hallmark of the cryptocurrency, with price corrections being common, ranging from 20% to 40%.

Increased institutional adoption and integration into mainstream finance through spot ETFs could solidify its legitimacy.

Nonetheless, macroeconomic factors, market liquidity and regulatory policies under the Trump administration may influence its performance. Continued inflation and monetary policy uncertainty may also drive interest in Bitcoin as a “store of value.”

As monetary policy eases in 2025, liquidity could flow into digital assets, boosting demand for Bitcoin.

The Trump administration’s pro-crypto stance, including regulatory reforms and the appointment of crypto-friendly officials, could further accelerate Bitcoin’s integration into traditional finance.

Bitcoin’s growing legitimacy is reflected in its $2.03 trillion market cap and the approval of spot ETFs in 2024.

With significant asset managers like BlackRock and Fidelity entering the market, Bitcoin is becoming increasingly recognized as a legitimate portfolio asset.

The Rise of Bitcoin Yielding Companies

Over the last weeks, several companies that bought Bitcoin disclosed their holdings and BTC Yield figures.

According to CoinShares, Bitcoin-yielding companies are reshaping corporate finance as businesses adopt Bitcoin as a treasury asset, seeing it not just as a store of value but as a source of yield.

Yield can include Bitcoin growth relative to company shares, yield farming through Bitcoin lending and using derivatives to generate income. MicroStrategy , holding 402,100 BTC worth about $39.8 billion, is a prime example, with its BTC Yield metric tracking Bitcoin’s contribution to shareholder value.

Similarly, Block uses 10% of Bitcoin product profits to acquire Bitcoin via dollar-cost averaging. Meanwhile, MARA leverages low-interest debt to expand its Bitcoin holdings.

In 2024, BNY Mellon received the U.S. Securities and Exchange (SEC) approval to classify Bitcoin as an asset, enabling custody services for crypto ETFs and improving Bitcoin’s accounting treatment for companies like MicroStrategy.

This may mitigate impairment losses and create lending opportunities at 4-6% market rates. Companies like Semler Scientific and Metaplanet are also adopting Bitcoin as a treasury reserve, with the latter utilizing MicroStrategy’s BTC Yield metric.

This trend is accelerating, with major firms exploring Bitcoin in their treasury strategies.

As of December, corporate Bitcoin holdings have reached 939,190 BTC, a sharp rise from 80,000 BTC in 2020, representing about 2.5% of Bitcoin’s total supply. Corporate adoption is expected to grow in 2025, especially with evolving regulatory clarity and political stability.