It seems hard to believe, but the price of Bitcoin (BTC 0.99%) on Jan. 1, 2023, was just $16,625. Fast-forward to today, and the price of Bitcoin is nearly $85,000.
In a period of just over two years, the price of Bitcoin has skyrocketed by more than 400%. And that's even after a 22% decline from an all-time high of $109,000 earlier this year.
The real test for Bitcoin, however, comes right now. Will tariff uncertainty sink Bitcoin? Or will Bitcoin find a way to continue its seemingly unstoppable ascent higher?
Could tariffs actually be bullish for Bitcoin?
On the surface, it might seem absurd to suggest that tariffs could possibly be bullish for Bitcoin -- especially not when some tariffs levied against China could exceed 245%. From the perspective of global trade, those are extinction-level tariffs. So it's hard to believe that even Bitcoin -- a cryptocurrency that has weathered plenty of financial storms in the past -- would be able to prosper.
But here's the thing: After the initial shock of the "Liberation Day" tariffs has worn off, the narrative around Bitcoin is starting to change. Have you noticed?
At first, the narrative was that if big tech stocks are falling, then Bitcoin must fall as well. But Bitcoin has barely budged since the Liberation Day tariffs were announced. On April 2, the price of Bitcoin was $85,000. And today, the price of Bitcoin is approximately $85,000.
CRYPTO: BTC
Key Data Points
Some investors think Bitcoin could be a safe-haven asset for investors taking refuge from the global economic storm. From this perspective, Bitcoin could be "digital gold" and a potential "store of value." If everything else around you is crashing down, maybe Bitcoin will be able to hold the line? If this investment thesis begins to resonate with investors, it's easy to envision a new inflow of investor money into Bitcoin via the new spot Bitcoin ETFs.
Tariffs and the Strategic Bitcoin Reserve
And there's one more new wrinkle to all this. In mid-April, Bo Hines, the executive director of the Presidential Council of Advisers on Digital Assets, suggested that new tariff revenue might be used to purchase Bitcoin for the Strategic Bitcoin Reserve. This is important because, when the White House originally announced this Bitcoin reserve in March, it clearly pointed out that any future purchases of Bitcoin needed to be "budget-neutral."
So the question now becomes, "Does new tariff revenue count as being budget-neutral?" From the perspective of the government, all this new tariff revenue is sort of a "windfall profit" that can be spent on buying Bitcoin. On the other hand, taxpayers could view the tariffs as an unfair new tax being placed on them to buy more Bitcoin for the government. So this could end up being very controversial.
The original vision for the Strategic Bitcoin Reserve was to buy 200,000 BTC per year, over a total of five years. At the end of that time period, the U.S. would own 1 million BTC, or roughly 5% of all Bitcoin in circulation. That was the goal of the incoming Trump administration: to make America a Bitcoin superpower.
So, if tariff revenue is declared "budget-neutral," we're talking about a potentially massive new program of Bitcoin purchases. Obviously, this sustained buying of crypto by the U.S. government would be very bullish for Bitcoin. And it might even encourage other trading partners to take the same approach.
Is Bitcoin "tariff-resistant" or "tariff-proof"?
Just keep in mind: There's a big difference between Bitcoin being "tariff-resistant" and "tariff-proof." To understand this point, try this little experiment: Go out into a raging thunderstorm wearing a "water-resistant" jacket, and let me know how that goes. That's when you'll realize there's a world of difference between something being "water-resistant" and "waterproof."
Image source: Getty Images.
In much the same way, there's a huge difference between a digital currency being "tariff-resistant" or "tariff-proof." If the upcoming tariff storm is heavy enough and long enough, you will soon see the difference.
All of which is to say: Be careful about putting too much faith in Bitcoin. Yes, it has held up remarkably well since Liberation Day. And, yes, the 410% returns over the past two years have been phenomenal. But, at the end of the day, no asset -- not even Bitcoin -- is likely to be tariff-proof.
