This time crypto prices are crossing the 100k mark once again and Ethereum is taking gain in its momentum, investors are left wondering if this is a temporary recovery or if we are in the age of a new crypto bull run. Let's explore the impact of recent geopolitical developments on the crypto market, analyze the opinions of the experts, look at the long-term economic policies' effects on the cryptocurrency market, and get the answer to the question: Will cryptocurrencies rally in the long run?
Tariffs and the Crypto Market: Understanding the Connection
Initially, it may not be obvious that U.S. trade tariffs have any relationship to cryptocurrency prices. But macro trends and global financial policies also cannot be kept at bay when it comes to crypto markets. The announcement of the introduction of tariffs caused a panic in the market, with a sell-off on scale across the entire crypto sector.
The impact that tariffs have on digital assets is as follows:
1. Economic Uncertainty Drives Risk-Off Sentiment
Uncertainty prevailing in global markets is more because of trade tensions among major economies. As long as there is no certainty about what is going to happen with international trade, investors prefer not to take a risk in riskier assets such as cryptocurrencies and prefer safe options such as the U.S. dollar, gold, or U.S. Treasury bonds.
2. Capital Flight and Market Volatility
Capital flight refers to the investors pulling their money out of volatile markets due to changes in economic policies such as tariffs on a sudden basis. When Trump first announced his tariffs on 3rd February, Bitcoin dropped from $101,000 to $92,000 and Ethereum lost ground from its high of $2,880 down to $2,451.
3. Currency Depreciation Encourages Crypto Adoption
When it comes to the matter of inflation from trade tariffs or devaluation of a fiat currency, many investors seek cryptocurrencies as a haven. For instance, if the tariff rips apart the Canadian or Mexican economy and there's an opportunity cost assumed by having less money show up in your bank account versus earnings, people would need to convert that Canadian dollar or Mexican peso into Bitcoin or any kind of USD backed stablecoin to save their wealth.
Market Recovery: Bitcoin and Altcoins Bounce Back
After the announcement that the cryptocurrency markets would be relieved of tariffs for at least a month, the cryptocurrency markets rebounded strongly.
Bitcoin’s Resurgence
Records show that Bitcoin (BTC), which was trading as low as $92,000, managed to surpass the $100,000 mark again to hit $101,731, according to CoinMarketCap. The tariffs remained overnight but that didn’t stop markets from quickly recovering as traders saw that as a positive signal for risk assets like cryptocurrencies.
Ethereum and Altcoins Follow Suit
The second largest cryptocurrency by market capitalization, Ethereum (ETH), also rallied from its losses to correct the market. It then fell to $2,451 and rebounded to $2,880. The market sentiment improvement resulted in double-digit percentage gains for other major altcoins such as Solana (SOL), Cardano (ADA), and Polkadot (DOT).
Fear & Greed Index Moves Into Greed Territory
Crypto Fear & Greed Index is one of the clearest indicators of shifting market sentiment, indicating investors’ feelings and market sentiment from extreme fear on the bottom to extreme greed on the top of the scale.
The tariff pause had yet to take place: The index was in the fear zone, reflecting the uncertainty spanning the globe.
Following the pause of the tariff: we can see the index moving back to greed territory to a reading of 72, highlighting that investors are becoming more sure.
Expert Opinions on the Market Recovery
Some of the industry experts who commented on the recent developments have weighed in on whether this recovery is likely to hold, or whether it is a mere bounce.
Pav Hundal (Swyftx) on Bitcoin’s Bullish Potential
Lead market analyst at Swyftx Pav Hundal believes the market was breathing a sigh of relief in the medium term with the temporary cease on tariffs.
So uncertainty was the driver for most of the outflows that we saw during the initial sell-off. “Investors are relieved after the immediate threat of tariffs was paused, recovering most digital assets completely.”
However according to Hundal, if concerns over tariffs keep disappearing Bitcoin could swiftly hit a new all-time high in an environment in which U.S. economic policies are becoming more friendly to digital assets.
Sean Dawson (Derive.xyz) on Institutional Interest
Another factor indicating a positive sentiment is Trump’s executive order, which formed a U.S. sovereign wealth fund with the Treasury and Commerce departments.
“It could suggest an increase in bullish messaging for digital asset space.” “Of course, if this fund is also accepting cryptocurrencies or blockchain-based investments, we could very well experience an influx of institutional adoption.”
The nominee for Commerce Secretary, however, is also a key figure pointed to by Dawson as someone who could advocate for more crypto-friendly regulations like Howard Lutnick.
Chris Chung (Titan) on the Overreaction to Tariffs
Many experts don’t think this movement in the market was rational. Solana-based swap platform, Titan, was founded by Chris Chung, who thinks it was an overreaction initially to the sell-off.
“Digital transactions aren’t tariffed. As the industry is independent of global trade policies, the panic selling we have seen earlier wasn’t necessary.”
But even if tariffs result in inflation, many investors will likely accept crypto as an inflation hedge, Chung admits.
Potential Long-Term Implications for Crypto
While prices have rebounded immediately in response to last week’s Crypto Crash, investors are also advised to look at the long-term effect of U.S. trade policies and economic trends on the prices of cryptocurrencies.
- Tariff Uncertainty Remains a Risk
The 30-day pause on Tariffs does not constitute an end to such a future action. But if an agreement is not brokered by the U.S., Canada, and Mexico, then tariffs could still be put into place, which would certainly cause another round of market volatility.
- U.S. Regulatory Landscape May Shift
President Trump’s executive order and Howard Lutnick’s positive crypto comments may imply a change in crypto regulations favoring the industry. While blockchain technology and digital assets will still catch on, good incentives will create more adoption by the institutional players who are skeptical of it.
- The Role of Crypto as a Safe Haven Asset
As the trade wars escalate, leading to the devaluation of the fiat currency, more investors may adopt Bitcoin as well as stablecoins as the haven assets. It could lead to a boost in digital currencies as more people adopt them and other peers follow the trend in troubled economies.
Investor Takeaways: How to Navigate Market Volatility
As the recent price swings teach crypto investors, risk management will always matter for crypto investors. Here are some key takeaways:
It is a good time to diversify your portfolio: hold your Bitcoin, altcoins, and a bit of stablecoin then.
In addition, Monitor Macroeconomic Events – including trade negotiations, U.S. economic policies, and changes in the global financial landscape all play a part in the price of crypto.
It is Important to Adopt a Long-term Term Perspective While the Price Movement in the Short term is Unpredictable, a long-term Investment Strategy Might Help to Deal With the Market Volatility.
A New Bull Run or Temporary Recovery?
With U.S. tariffs on imports from the U.S. China FedEx, the lack of the same action on the cryptocurrency market says a lot about the mood in the market. Still, as investors, the news should be taken with a grain of salt as long as there is a possibility of further trade negotiations and regulatory changes.
Experts like Pav Hundal and Sean Dawson believe that price action is supportive of new all-time highs, but it cannot be dismissed that trade tensions could flare again. Whether we are now at the start of a sustained bull run or simply the relief rally of a reprieve remains to be seen as the players of global economic policies settle themselves going forward.
Crypto investors can for now rest assured the market has shown it can recover once again after geopolitical strife.
[image source: Getting Images]
