Bitcoin Dips Then Bounces as Trump’s Tariff Shock Triggers Global Risk-Off – Are Markets Now Pricing in Long-Term Pain?

Bitcoin had a rough start to the week in Asia, briefly plunging to $74,508 — a one-month low, down over 6%. But by now, it has bounced back to $79,357, turning positive for the day with a 1.66% gain. Ethereum followed a similar pattern, recovering from $1,538 to $1,594. What triggered this big swing? In my view, it’s clearly the market’s response to Trump’s soon-to-be-implemented “reciprocal tariffs.”

Crypto’s Not Immune: Risk-Off Sentiment Is Sweeping Across Markets

Bitcoin has often been pitched as a hedge against traditional market risks, but the way it’s moving this week shows that narrative has its limits. With Trump confirming that new tariffs will go into effect on April 9, U.S. stock futures tanked, the Japanese yen surged, and global risk-off sentiment took hold. Bitcoin didn’t escape the turmoil. After an initial sell-off, we saw a wave of liquidations, with Coinglass data showing $150 million worth of liquidations in just 24 hours, including $117 million of long positions. This marked the largest liquidation in six weeks, underscoring the market’s sensitivity to policy risks.

Trump’s ‘Intentional’ Market Chaos: What’s His Endgame?

Unlike previous market crashes triggered by unexpected shocks, this time, Trump seems to be deliberately stoking the flames. He even shared a video on his social media platform “Truth Social,” with the headline “Trump is causing the stock market crash… but he’s doing it on purpose.” Later, he commented, “This is an economic revolution. The American people need to be patient.”

While U.S. Treasury Secretary Bessent tried to reassure the markets, saying there’s no reason to expect the tariffs will lead to a recession, the market seems to be pricing in deeper, more long-term effects. AJ Bell analysts estimate that global stock markets have shed around $4.9 trillion in value over the past few days, with the Financial Times suggesting the actual figure might be closer to $5.9 trillion.

So, why the panic? On one hand, it’s likely an attempt to protect domestic industries by suppressing foreign goods. On the other hand, it could be a strategy to negotiate for bigger concessions.

Why Bitcoin Fell Instead of Hedging: Structural Factors at Play

Theoretically, a global trade conflict sparked by Trump should create more demand for non-sovereign assets like Bitcoin. But the recent drop reveals a few crucial issues:

1. Liquidity Panic: When facing systemic risk, markets often sell off high-volatility assets to shore up margin, and the crypto market, with its heavy leverage, is the first to feel the heat.

2. Technical Breakdown: FalconX’s derivatives head noted that Bitcoin recently broke the $75,000 support level, while Ethereum slipped below $1,500, triggering a flood of stop-loss orders.

3. Bearish Sentiment in the Options Market: Implied volatility for put options has spiked, indicating that the market is bracing for a deeper pullback.

That said, Daan Crypto Trades points out that while Bitcoin’s volatility has been relatively compressed compared to the soaring VIX (Volatility Index) of U.S. stocks, this divergence suggests that Bitcoin might be gearing up for another big move — the direction of which remains uncertain.

Long-Term View: Could Bitcoin Emerge as a Hedge in the New Cold War?

Pantera Capital partner Cosmo Zhang argues that this pullback isn’t about deep-rooted issues within the U.S. economy but rather the impact of policy decisions. If the market believes Trump will continue to dominate the policy agenda (perhaps even securing re-election by year’s end), the trade tensions stemming from the tariffs could evolve from a short-term “disruption” into a long-term, structural trend.

In such a scenario, Bitcoin’s role may shift:

• Short-term: Still vulnerable to the sell-off in risk assets.

• Medium to long-term: As anti-globalization, currency devaluation, and capital controls gain traction, Bitcoin could offer strategic allocation value.

Trader Cas Abbe suggests the recent crash could be a “false breakdown” and not a trend reversal. The key point will be whether Bitcoin can reclaim $92,000 by the end of the week to confirm a structural recovery.

Bitcoin Is Going Through a ‘Policy Shock Test’

This drop and recovery in Bitcoin prices is a precursor to the kind of “price reflex” we’re likely to see more of, driven by Trump’s trade war strategy. The market turmoil caused by tariffs might not be a short-term event but rather the beginning of a macro game and a new normal of policy uncertainty.

Bitcoin’s future price movements are shifting from being driven by “technical patterns” to being “politically priced.” If tariffs continue to dominate the geopolitical and financial landscape for the next several years, the pricing logic for crypto assets will undoubtedly change as well.