Markets Daily Crypto Roundup: Crypto Update | Will Trump's Tariffs Tank the Crypto Markets?
Release Date: February 26, 2025
Host: Jen Senasi, CoinDesk
Introduction
In the February 26, 2025 episode of Markets Daily Crypto Roundup, hosted by Jen Senasi from CoinDesk, the focus centers on the impending tariffs imposed by former President Donald Trump and their potential ramifications on the global economy and cryptocurrency markets. This episode delves into the economic tensions between the United States, Canada, and Mexico, and analyses how these geopolitical maneuvers might influence the volatile world of crypto.
Trump's Tariffs: An Overview
The episode opens with a clip of Donald Trump addressing the press at the White House:
“We're on time with the tariffs and it seems like that's moving along very rapidly. We've been mistreated very badly by many countries, not just Canada and Mexico. We've been taken advantage of.”
— Donald Trump [00:00]
Jen Senasi outlines Trump's recent executive actions:
- Tariff Implementation: On February 1st, Trump signed executive orders imposing a 25% tariff on products from Mexico and Canada, including a 10% duty on Canadian energy exports.
- Rationale: The administration cited concerns over fentanyl flows and illegal immigration as primary reasons for these measures.
- International Response: In retaliation, Canada and Mexico announced their own tariffs on American imports. However, these were temporarily paused following commitments from Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau to enhance border policing.
Economic Implications for the US, Canada, and Mexico
The tariffs have stirred significant economic discourse. Jen references insights from the Brookings Institution:
- Economic Blow: The tariffs are projected to harm the economies of the US, Canada, and Mexico by disrupting trade relationships.
- Supply Chain Security: They could hinder the US’s efforts to develop more secure supply chains and compete with China.
- Long-term Consequences: Beyond the immediate economic impact, the tariffs may have enduring diplomatic and strategic repercussions.
Expert Insight:
“The economic consequences of a protracted trade conflict would be severe, but it would be a very different shock than the COVID-19 shock.”
— Economic Analyst [01:30]
Bank of Canada Governor Tiff Macklem elaborates on the potential long-term damage:
“The Canadian economy would suffer permanent damage if the tariffs are implemented.”
— Tiff Macklem [01:55]
Mexican President Sheinbaum remains optimistic about reaching an agreement with Trump and hints at imposing levies on Chinese goods to secure a deal.
Impact on Cryptocurrency Markets
The discussion transitions to the possible effects of these tariffs on crypto markets, featuring insights from CoinDesk senior editorial analyst James Van Stratton and Bank of Canada Governor Tiff Macklem.
Bitcoin's Performance:
Governor Macklem shares his analysis of Bitcoin's recent movements:
“Bitcoin just broke below a key metric. The short-term holder realized price at 91,000 and the 200-day moving average sits at about 81,82,000.”
— Tiff Macklem [03:04]
He contrasts his expectations with the market's outcome:
“I was expecting it to break, but I was actually expecting it to rate to the upside as a permeable. But we got the downside break of the channel.”
— Tiff Macklem [02:33]
Market Sentiment and Liquidity:
Van Stratton discusses the broader market reactions:
“Trump said that the tariffs would make the US extremely liquid and rich. Again, when you hear this, what do you make of it?”
— James Van Stratton [03:33]
Governor Macklem responds by highlighting the current economic indicators:
“The market's telling us it's not inflationary. We had a massive services print in the US Last week where it showed contraction, and that's being reflected in the markets.”
— Tiff Macklem [03:33]
He further explains the interconnectedness of global economies:
“Everything's so interconnected. Western economies are experiencing inflation while China is undergoing deflation, creating a 'tale of two economies.'”
— Tiff Macklem [04:42]
Expert Perspectives and Analysis
Governor Macklem provides a nuanced view of the tariffs:
“Tariffs are ultimately attacks on the workers, so I don't think they're great... It's so hard to tell. It's such short-term policies and negotiations are still going on.”
— Tiff Macklem [06:03]
He emphasizes the uncertainty surrounding inflation, GDP growth, and employment across the US, Canada, and Mexico, stressing the complex landscape that crypto markets must navigate.
Cryptocurrency Market Dynamics
The conversation delves deeper into how tariffs and economic policies influence crypto:
Decoupling of Crypto Assets:
Governor Macklem observes a divergence between Bitcoin and other cryptocurrencies:
“We are seeing a massive decoupling between Bitcoin and crypto prices. Solana is about 50% off its highs, stemming from meme coin action in recent weeks.”
— Tiff Macklem [06:56]
He attributes bearish sentiments in the crypto industry to external market perceptions that may not differentiate between Bitcoin and other crypto assets.
Liquidity and the Dollar Index:
Governor Macklem highlights the significance of the dollar index:
“The dollar index is incredibly strong. If we can get it heading back down to 100, that would give some bullish sentiment for crypto.”
— Tiff Macklem [08:18]
He draws parallels to the first presidential term's impact on the dollar and subsequent bull market in 2017.
Investor Guidance
Addressing investor concerns, Governor Macklem advises monitoring key economic indicators:
“I think it's all liquidity-driven and that's kind of evaporated at the moment.”
— Tiff Macklem [08:18]
He underscores the importance of the dollar's trajectory in shaping crypto market trends.
Counterarguments and Broader Market Influences
Responding to critiques that tariffs may not directly influence crypto prices, Governor Macklem argues that crypto behaves as a macro asset intertwined with traditional financial uncertainties:
“Crypto kind of trades as a macro asset. So if there's uncertainty in traditional finance, there's going to be uncertainty in crypto.”
— Tiff Macklem [09:04]
He emphasizes the multitude of factors affecting crypto markets, including geopolitical tensions, inflation rates, and economic growth metrics.
Conclusion
Jen Senasi wraps up the episode by summarizing the potential fallout of Trump's tariffs:
The looming tariffs on Canada and Mexico could have far-reaching economic consequences, impacting trade relationships, inflation, and even crypto markets. While some argue that these policies have little to do with Bitcoin's price movements, uncertainty in global markets often fuels volatility across all asset classes. We'll continue to monitor these developments and their implications for investors.
Stay tuned to Markets Daily Crypto Roundup for ongoing updates on the most significant stories shaping the crypto landscape.
Notable Quotes:
- “We're on time with the tariffs and it seems like that's moving along very rapidly.” — Donald Trump [00:00]
- “The economic consequences of a protracted trade conflict would be severe...” — Economic Analyst [01:30]
- “Bitcoin just broke below a key metric...” — Tiff Macklem [03:04]
- “Crypto kind of trades as a macro asset...” — Tiff Macklem [09:04]
Key Takeaways:
- Tariff Implementation: Trump's tariffs on Canada and Mexico aim to address illicit activities and immigration but risk damaging economic ties with key allies.
- Economic Impact: Experts warn of severe and long-lasting economic repercussions for the US, Canada, and Mexico, including hindered supply chains and stunted growth.
- Crypto Market Influence: While tariffs themselves may not directly affect crypto prices, the resulting economic uncertainty contributes to market volatility and bearish sentiments.
- Investor Strategy: Monitoring the dollar index and understanding liquidity trends are crucial for investors navigating the crypto space amidst geopolitical tensions.
For comprehensive insights and daily updates on cryptocurrency markets, subscribe to CoinDesk's Markets Daily Crypto Roundup.