Trade Wars & Crypto: What Does a Trade War Mean for Bitcoin?
Crypto is an independent market, but that doesn't mean it isn't impacted by tariffs, global trade and market conditions. Learn about trade wars and cryptocurrency.
Trump’s global tariffs rollout has started a trade war with China, with traditional stock markets showing erratic patterns since the implementation and escalation. While it might seem like Bitcoin and other cryptocurrencies might be spared the drama given their digital nature, it’s not quite that simple. Let’s take a look at how and why tariffs and trade wars impact cryptocurrencies.
How do trade wars impact cryptocurrency?
You only need to look at the price movements for Bitcoin since the introduction of Trump’s tariffs to see that trade wars do impact cryptocurrency, but there’s actually good and bad to consider. The main reasons trade wars may impact crypto include:
Increased volatility: Trade wars create uncertainty in global markets. Traditional assets like stocks and bonds often become more volatile, and cryptocurrencies, being highly speculative, tend to mirror or even amplify that volatility. Traders may either rush into crypto for quick profits or flee from it, fearing broader market collapses.
Safe haven appeal: During major economic conflicts (like a trade war between the U.S. and China), some investors see Bitcoin (BTC) and certain other cryptocurrencies as "safe haven" assets, similar to gold. If confidence in national currencies or markets drops, people might move into crypto to preserve their wealth. However, this behavior is not consistent and depends heavily on sentiment.
Currency depreciation and capital flight: If a country’s currency weakens because of tariffs, sanctions, or trade tensions, citizens might buy crypto to protect against inflation or capital controls. For example, during periods when the Chinese yuan weakened, there was often an uptick in Bitcoin activity among Chinese investors.
Regulatory responses: Governments might tighten crypto regulations during trade wars, especially if they suspect citizens are using cryptocurrencies to bypass capital restrictions or sanctions. Conversely, some countries may relax regulations to attract crypto investments if trade wars harm their traditional economies.
Impact on mining and infrastructure: Trade wars can disrupt supply chains for crypto mining hardware (like GPUs and ASICs), especially if tariffs are imposed on electronics between major economies. This can affect mining profitability and decentralization.
Long-term shift toward decentralization: Broader, prolonged trade wars might accelerate interest in decentralized financial systems and cryptocurrencies as alternatives to government-controlled financial infrastructure.
If you're worried about trade wars and crypto, you're not alone. Trade wars pose several key risks to crypto, primarily by amplifying economic instability and provoking heavy-handed government reactions.
One major threat comes from broader market panic: if a trade war escalates into a full-blown global recession, investors typically flee riskier assets in favor of safer, more liquid holdings like cash or government bonds. In this environment, Bitcoin and other cryptocurrencies, which are often categorized alongside speculative assets, may experience sharp sell-offs. Rather than serving as a safe haven, prices might crash in tandem with equities as investors prioritize financial preservation over growth or innovation.
Another serious risk stems from the potential for tighter regulations. Governments embroiled in trade conflicts may become more aggressive in policing cross-border financial flows, fearing that cryptocurrencies could be used to evade tariffs, bypass capital controls, or launder illicit funds. In response, authorities might impose stricter controls on crypto exchanges, introduce new compliance requirements, or even restrict crypto usage altogether.
Finally, trade wars can disrupt the global supply chains critical to blockchain infrastructure, particularly the mining industry. Mining hardware like GPUs and ASIC chips often relies on international manufacturing and distribution networks. Tariffs or restrictions on electronic components can increase costs and limit access to necessary technology, thereby raising operational expenses for miners.
For example, Trump's most recent trade policies have resulted in a significant drop in "hashprice" - the amount of money a Bitcoin miner earns per unit of computing power (per terahash) per day - to $40, the lowest since September 2024. This decline has pushed many mining operations to the brink of unprofitability. A major contributing factor to this is the imposition of steep tariffs on Chinese imports, including essential mining hardware. These tariffs have escalated to a cumulative 131%, substantially increasing the cost of acquiring new mining equipment. This financial strain is compounded by Bitcoin's price volatility, reduced transaction fees, and increasing network difficulty, all of which collectively squeeze miners' profit margins.
Read next: What Determines the Price of Crypto?
Are trade wars good for crypto?
While trade wars introduce risks, they also pose opportunities for the crypto sector. One major advantage lies in crypto's potential to serve as a hedge against currency devaluation. When a country's economy suffers under the strain of tariffs and sanctions, its national currency often weakens, eroding citizens' purchasing power. In such situations, as seen in countries like Argentina, Turkey, and even China during past trade tensions, Bitcoin, in particular, can become an attractive alternative store of value. People may turn to crypto not for speculative gains, but to preserve their wealth against inflation, capital controls, or failing banking systems.
Beyond personal financial protection, trade wars can also erode broader trust in traditional financial institutions. As prolonged economic conflicts damage confidence in banks and government-backed fiat currencies, more individuals may seek alternatives through DeFi, stablecoins, and major cryptocurrencies. As geopolitical tensions rise, so does the appeal of non-sovereign digital assets, reinforcing crypto’s value proposition as a tool for financial freedom and independence from political turmoil.
Read next: Crypto Taxes Guide
How does the stock market impact crypto in trade wars?
Stocks and crypto often impact each other through investor behavior and market sentiment, and the connection can be either strong or weak depending on the situation. Here's the short version:
When stock markets go up (especially tech stocks), people feel wealthier and are sometimes more willing to invest in riskier assets like cryptocurrencies. When stocks crash or drop sharply, like in a trade war, investors often sell crypto too, treating it like any other risky asset, to move into cash or safer investments.
Read next: Best Crypto Stocks
What happens next for crypto in the trade war?
Your guess is as good as ours. The market movements from trade wars, particularly for crypto, largely come down to investor sentiment, which is almost impossible to predict. Bitcoin has seen a price rebound in recent days following a near 30% market correction, but that doesn’t mean we couldn’t see large sell-offs to take profits again soon. As ever, keep an eye on market movements, never invest more than you can afford to lose, and DYOR to understand what you’re investing in before you take the plunge.
Don't forget the tax bill...
While many investors see Trump as a bullish president for crypto, thanks to rumours circulating about the President planning to remove tax from crypto gains, your crypto isn't tax free... yet. Make sure you stay up to date with your tax obligations with a free crypto tax calculator like Koinly.
