Bitcoin (BTC) Market Enters 'Tariffs On/Tariffs Off' Era as Trump's Announcements Guide Prices

If you follow financial markets, you've probably come across the terms "risk-on" and "risk-off." Now we seem to be entering a new era of "tariffs on/tariffs off."

Financial markets are largely influenced by two key terms: "risk-on" and "risk-off." Recently, a new dynamic has emerged in response to President Trump's tariffs announcement, introducing the concept of "tariffs on/tariffs off."

During a risk-on period, assets that are sensitive to growth, such as stocks and cryptocurrencies, tend to rise in value. This is typically driven by expectations of economic expansion or accommodative monetary policy. On the other hand, risk-off situations are characterized by a lack of investor confidence, leading to sell-offs and a preference for safer assets.

This week, President Trump's tariffs announcement have had a significant impact on markets. On Monday morning, bitcoin (BTC) price took a hit, plummeting to nearly $91,000 as Canada and Mexico retaliated against Trump's tariffs. This marked the "tariffs on" trading session.

However, the tables turned later in the day when bitcoin rebounded above $100,000 after Trump paused the Mexico tariffs for 30 days and announced the creation of a sovereign wealth fund, sparking hopes of potential investments in BTC. This shift signaled the "tariffs off" trading session.

The bullish momentum seemed to stall on Tuesday morning as China retaliated against Trump's import tax, resuming the "tariffs on" trading session. BTC price dropped over 3% to $98,000, dragging altcoins lower. Nasdaq futures also declined by more than 0.5%, while the dollar drew haven bids.

If Trump manages to announce an 11th-hour deal with China, like he did with Mexico and Canada on Monday, bitcoin and the broader crypto market will likely rebound. However, foreign-exchange market activity suggests that this scenario is likely.

The AUD/CAD pair is down only 0.3% for the day, indicating that traders don't anticipate a protracted tariff war between the U.S. and China. The Australian dollar is commonly used as a proxy for China in forex markets.

“A cross like AUD/CAD should trade sharply lower in this situation given Canada has dodged tariffs and China has not, but it is only 0.5% lower on the day. That signals markets are pricing in a good chance that the US and China will also strike a deal and delay tariffs,” ING wrote in a note to clients.

Despite the analysis, anything can happen with Trump, so traders should expect heightened volatility and stay vigilant.