Why Trump’s Trade War Could Actually Boost Bitcoin, According to Top Analyst

In the wake of President Trump’s latest tariffs, the crypto market has seen some sharp reactions, with Ethereum dropping by 25% and Bitcoin also taking a hit. But while the immediate fallout has been rocky, some believe the long-term implications of Trump’s trade war could be a major tailwind for Bitcoin.

Fundstrat’s Head of Digital Asset Strategy, Sean Farrell, sees the current turbulence as part of a broader strategy. "Coming into this year, we were pretty bullish. We had just been coming off some decent chop ... a lot of that chop was due to ... concerns around tariffs," he explained. "We saw upward pressure in yields in the dollar. And that was putting some downward pressure on crypto prices."

While many traders were caught off guard by Trump’s latest moves — which included proposed 25% tariffs on Mexico and Canada and an additional 10% on China — Farrell believes the market may have overreacted. "I think people are overestimating the extent to which Trump is going to go with these tariffs to use as a bargaining chip in negotiations to reduce the trade deficit," he noted. But he also admitted that "the market was not anticipating what happened last week."

One of the key concerns is that tariffs can create a "quasi stagflationary pricing" environment. "People anticipate inflation taking a step function higher and real growth slowing, which is a regime in which crypto generally doesn’t do well," Farrell explained. In the short term, Fundstrat has advised clients to take a more cautious stance. "We put out a note last night advising clients to perhaps raise some cash on any balance here."

Despite the immediate challenges, Farrell remains confident in Bitcoin’s long-term trajectory. "Looking through this, there is a very strong bull case to be made," he said. One of the major bullish factors is the administration’s growing interest in Bitcoin as a strategic reserve asset. AI and Crypto czar David Sacks recently stated that "one of the first things we're going to look at is the feasibility of a Bitcoin reserve."

While some have speculated that this could lead to major Bitcoin purchases by the government in the near future, Farrell is more measured. "I don’t think we’re going to get real movement on the [Strategic Bitcoin Reserve] or any news around it until we get closer to that deadline that the White House working group has been given, which is, I think, 180 days since the signing of that executive order," he explained. "So that kind of takes the good news upside headline risk off the table in the near term."

Beyond the federal government, Farrell also sees movement at the state level. "I think states will probably lead. We have 15 states with proposed legislation for some semblance of a [Strategic Bitcoin Reserve.] Two bills have moved past committee. So there is progress to note there," he said, adding that the federal government still could be the first to get there.

One of the biggest takeaways from Trump’s approach is its potential impact on the dollar. "Given that Bitcoin is this great hedge against monetary debasement as well in a weak dollar regime, it's a great asset to have," Farrell explained. "The goal of the Trump administration, the stated goal was to onshore manufacturing, which in order to do that, you need to make it economically viable for companies to manufacture goods here, which requires a weaker dollar."

Farrell pointed to a paper by Stephen Moran, the Chair of Trump’s Council of Economic Advisers, which laid out a plan to use tariffs as a "bludgeoning tool." "We have this powerful weapon in the dollar. You know, we can bring other nations to their knees... because all of their debt is denominated in U.S. dollars," Farrell said. "And so if we enact tariffs and create this stronger dollar environment, a lot of these other countries start to hurt."

Ultimately, Farrell sees this strategy culminating in a "Plaza Accord-like agreement" where global powers agree to weaken the dollar. "The end result of that is, you know, these countries buying our long-term debt... and a weaker dollar and a greater supply of short-term debt in the market," he said. "That regime, broadly speaking, is very good for Bitcoin because a) you’re creating this multi-polar world, right? Where the dollar is less central... and you’re going to have this weak dollar environment, this implicit easy money policy."

For alternative debasement assets like gold and Bitcoin, that could be a recipe for a major run-up. "The faster horse there is going to be Bitcoin," Farrell said. While the short-term path is uncertain, his long-term price target remains unchanged at $175,000.

In Farrell’s view, the current volatility is just a necessary step in the larger process. "There's just a lot of uncertainty about the path and we're in this headline-driven whipsaw price action type market," he explained. "That in and of itself drives away a lot of capital, a lot of momentum-based capital."

But for those willing to endure the chop, the rewards could be substantial. "Ultimately, this resolves with Bitcoin and crypto moving," Farrell concluded.

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