Bitcoin Traders Overstate the Impact of US-Led Tariff War on BTC Price

Despite claims that the US-led tariff war is behind Bitcoin’s price struggles, several other factors have been contributing to its weakness throughout 2025.

Bitcoin has experienced a 2.2% increase on April 1, but despite this minor gain, the cryptocurrency has failed to surpass the $89,000 mark since March 7. While many attribute Bitcoin’s price struggle to the escalating US-led trade conflict, a closer look reveals that there are several other factors weighing on investor sentiment — and Bitcoin’s price — well before the tariff announcements began.

Gold/USD (left) vs. Bitcoin/USD (right). Source: TradingView

The Tariff War and Bitcoin’s Weakness: Overstated Impact

While the US-China trade war, initiated with President Donald Trump’s announcement of 10% tariffs on Chinese imports on January 21, has certainly influenced market sentiment, it’s inaccurate to place the blame solely on these tariffs for Bitcoin’s year-to-date struggles. Despite popular belief, Bitcoin had already been showing signs of limited upside months prior to this escalation.

Bitcoin traders often point to the $5.25 billion in Bitcoin purchases by Strategy since February, suggesting this is the main reason Bitcoin has managed to hold above the $80,000 support level. However, Bitcoin’s price had already struggled to break through the $100,000 barrier well before the tariffs were imposed. In fact, while the S&P 500 reached an all-time high on February 19, Bitcoin remained largely stagnant and couldn’t maintain significant momentum above $90,000 for the three months leading up to that point.

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Spot Bitcoin ETFs and Institutional Demand

An important factor that weakens the argument for the trade war being the primary cause of Bitcoin’s price struggles is the ongoing institutional interest in the cryptocurrency. Spot Bitcoin ETFs, which saw $2.75 billion in net inflows in the three weeks following the January 21 tariff announcement, suggest that institutional demand for Bitcoin persisted even as trade tensions escalated. Despite geopolitical instability, the demand from institutional investors remained robust.

Additionally, expectations surrounding a “strategic national Bitcoin stockpile” in the US, which was part of President Trump’s campaign promises at the Bitcoin Conference in July 2024, may have contributed to some of the price volatility. Many investors had unrealistic hopes regarding the government’s involvement in Bitcoin acquisition. When the executive order addressing these promises was finally issued on March 6, many were disappointed, leading to frustration in the market.

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Inflationary Trends and Risk Aversion Affect Bitcoin’s Struggles

Another crucial factor contributing to Bitcoin’s failure to break above $89,000 is the macroeconomic environment, particularly inflationary trends. Despite central banks around the world successfully keeping inflation at bay, inflationary concerns remain. In February, the US Personal Consumption Expenditures (PCE) Price Index showed a 2.5% year-over-year increase, while the eurozone’s Consumer Price Index (CPI) rose 2.2% in March. While these figures are relatively stable, inflation is not as high as it was in previous years, meaning Bitcoin may not be viewed as the same hedge against inflation that it once was.

US CPI inflation (left) vs. US 2-year Treasury yield (right). Source: TradingView

Furthermore, as inflation remains controlled, lower interest rates could favor traditional investments like real estate and stocks more than Bitcoin, as cheaper financing costs stimulate those markets.

Weakened Job Market and Reduced Risk Appetite

The overall risk appetite in the market is also weakening, which has had a negative impact on Bitcoin. In February 2025, US job openings dropped to a four-year low, signaling a sluggish labor market. At the same time, yields on the US 2-year Treasury fell to a six-month low, with investors accepting a modest 3.88% return. This increased demand for the relative safety of government-backed bonds suggests that investors are becoming more risk-averse — a sentiment that does not bode well for speculative assets like Bitcoin.

In 2022, Bitcoin experienced significant gains when inflation soared above 5%, as investors flocked to the cryptocurrency to protect against rising costs. However, with inflation more under control in 2025 and a shift toward low-risk government bonds, Bitcoin is facing headwinds that are unrelated to trade wars or tariff conflicts.

Conclusion: Multiple Factors Behind Bitcoin’s Price Weakness

While the US-led tariff war undoubtedly added some pressure to Bitcoin’s price in early 2025, it is clear that several other factors have contributed to the cryptocurrency’s price weakness. Unrealistic expectations of Bitcoin acquisition by the US Treasury, the cooling inflationary environment, and a more risk-averse market all played key roles in Bitcoin’s struggles. Moreover, the trade war itself was merely one factor among many and cannot be credited with the primary cause of Bitcoin’s stagnation.

Bitcoin’s price action over the past few months reflects the broader economic environment rather than just geopolitical events. As the market adapts to these macroeconomic conditions, traders will need to consider a range of factors beyond the tariff dispute when evaluating Bitcoin’s future price potential.