Three ways tariffs could upend the crypto market in 2025
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Trump's cryptocurrency sees 70% value jump after VIP dinner offer
The value of Trump's meme coin has seen a huge value increase as he prepares to host two special events for its top investors. Crypto trading platform Coinbase revealed that '$Trump' soared after he announced that 220 of its biggest holders will be invited to a private gala dinner on May 22.
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Despite the fact that cryptocurrencies play very little role in the ebb and flow of global trade, tariffs have the potential to disrupt them in several profound ways. That's because the equity, debt and crypto markets are more interconnected than many people might assume.
Already, volatility has spiked and crypto prices are down nearly across the board, due to tariff uncertainty. So, which factors will have the greatest impact on your crypto portfolio in 2025?
Investor sentiment
Let's start with investor sentiment, because this is one factor that is easy to quantify. Right now, the Crypto Fear & Greed Index sits at 29, indicating that investors are relatively fearful. The index is measured on a scale from 0-100, with 100 being extremely euphoric.
This Fear & Greed Index briefly dipped below 20 in both March and April, due to all the concerns about tariffs. So the good news, if you want to call it that, is that investors seem to be calming down a bit.
But here's the thing: In the current environment, there is no appetite to buy speculative meme coins or risky altcoins. And that, unfortunately, means that "Altcoin Season" — the time of the year when altcoins go parabolic — may not be coming this year.
Historically, Ethereum (CRYPTO: ETH) has been the cryptocurrency that kicks off the start of Altcoin Season. And guess what? Ethereum is down 53% for the year and 16% during the past 30 days. Without Ethereum, there will be no Altcoin Season.
Instead, investors will be much more likely to move their money into Bitcoin (CRYPTO: BTC), which has often been referred to as digital gold. While it's still debatable whether Bitcoin can act as a long-term store of value, it does appear to be holding up better through this tariff upheaval than other top cryptocurrencies.
Crypto valuations tied to the macroeconomic outlook
At the same time, investors are rethinking how they value cryptocurrencies. During bullish market cycles, investors focus on variables related to blockchain growth — such as new user increases, gains in blockchain transaction activity, or rapid improvements in technical performance. But during bearish market cycles, focus shifts to fiscal policy, monetary policy and macroeconomic data.
As a result, crypto investors are taking a keen interest in macroeconomic data that might offer clues about inflation and where the economy could be headed. They are especially focused on potential moves by the U.S. Federal Reserve. That's because interest rate cuts are perceived as being very bullish for crypto.
In the past, this focus on the overall macroeconomic outlook was not so much the case for the crypto market. Crypto was uncorrelated with every major financial asset, and it really didn't matter what was happening on Wall Street or in Washington, D.C. Until fairly recently, institutional investors played very little role in the crypto market, and politicians paid almost no attention to crypto.
But all that changed in January 2024 with the introduction of spot Bitcoin exchange-traded funds ETFs. Now, the same people who buy tech stocks are buying spot Bitcoin ETFs, and that means they are looking at the same economic numbers. No wonder correlations between tech stocks and cryptos are tightening. For much of 2025, Bitcoin has behaved like a very expensive and volatile tech stock.
Crypto as a strategic asset for sovereign governments
If the trade war intensifies, it's possible that sovereign governments around the world will start to view crypto as a strategic asset that can help them achieve certain economic goals. After all, they might be forced to take drastic steps if exports dry up, or if economic growth grinds to a halt. And crypto could give them a very unique policy option.
Take, for example, the Strategic Bitcoin Reserve, which the Trump White House outlined in March. The current thinking is that Bitcoin is a strategic asset, similar to gold or oil, that the government should stockpile. In one scenario that has already been proposed by lawmakers, those Bitcoin reserves might one day be used to help pay down the government's crushing $37 trillion debt load.
Moreover, Treasury Secretary Scott Bessent has made no secret of the fact that stablecoins — the digital dollars of the crypto world — might be used to achieve certain monetary goals. That's because stablecoins are pegged 1-to-1 to the U.S. dollar, and are backed by cash and cash equivalents, including short-term Treasury bills.
These Treasury holdings create all sorts of new linkages between the bond market and the crypto market. For example, some have suggested that stablecoins have the potential to push down yields on U.S. Treasury debt, thereby reducing the government's interest costs on its debt.
Which cryptos to buy now
So, putting it all together, the perfect crypto to buy would be one that (1) is viewed as a safe asset and long-term store of value, (2) can outperform tech stocks, and (3) has the tacit support of sovereign governments.
From my perspective, all of that points to Bitcoin being the one crypto you need to buy right now. Although Bitcoin is far from being a slam-dunk investment, there's no other crypto I'd rather hold if Trump's tariffs turn into a full-blown trade war.
Dominic Basulto has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.
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