Crypto rallies ahead of Trump tariffs

Bitcoin has surged above US$86,000, driven by a noticeable uptick in institutional interest. US BTC-spot ETFs have recorded net inflows of around US$744.3 million, signalling that big investors are regaining confidence in the crypto market. On top of that, progress on Senator Cynthia Lummis’ Bitcoin Act and positive regulatory signals are helping to ease concerns around tariffs and recession risks.

A boost in market sentiment is also contributing to the rally. The Bitcoin Fear and Greed Index has jumped from 30 to 45, suggesting that optimism is building across the market.

As I mentioned in The Block's recent coverage, markets generally don’t like uncertainty, and with the US set to implement reciprocal tariffs next week, traders are bracing for potential turbulence.

Leading up to the tariffs

Sectors with significant foreign revenue exposure, such as technology, materials, and energy, are likely to face increased pressure. In contrast, defensive sectors like healthcare and utilities, which are less vulnerable to tariff-related risks, may hold up better and outperform the broader market. As tariffs approach, market sentiment could shift towards caution, leading to selloffs in the most impacted sectors.

After the tariffs come into effect

Expect volatility as the market digests the new risks. A knee-jerk reaction is likely as traders try to price in the potential economic fallout.

The longer-term impact will depend on the scale and duration of the tariffs. Defensive sectors could continue to show resilience, but industries with high foreign exposure may face prolonged difficulties, which will impact broader market sentiment.

When it comes to crypto, tariffs could place additional short-term pressure on risk assets, particularly if the US dollar strengthens because of trade tensions. However, if the market views the tariffs as part of a broader negotiation strategy and tensions ease, we could see a relief rally that lifts crypto prices.

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