The trade conflict that previously unsettled global markets has resurfaced, with Bitcoin now in the middle of the fray.
On October 15, President Donald Trump announced that the U.S. is officially in a trade war with China, stating:
“We’re in a [trade war] now. We have 100% tariffs. If we didn’t have tariffs, we would have no defense. They’ve used tariffs on us.”
This declaration solidifies a week of escalating tensions after he threatened to impose 100% tariffs on Chinese goods.
This warning set the stage for a monetary standoff with repercussions that are deeply felt in global financial markets.
Consequently, traditional stocks have dropped, while digital currencies saw about $20 billion in open interest wiped out within just 24 hours.
CoinGlass data indicates that Bitcoin and Ethereum were at the forefront of this decline, marking what is already a rare “red October” for major cryptocurrencies.
What is the impact on Bitcoin?
Tariffs function like an unseen tax, inflating the cost of imports, driving up production expenses, fueling inflation, and pressuring central banks to keep interest rates elevated for an extended period. This combination typically siphons liquidity from risk assets such as Bitcoin.
In 2018, comparable tariff announcements resulted in significant volatility that pushed Bitcoin under $6,000. This pattern seems to be recurring in 2025.
Institutional investors are slowly transitioning towards safer assets like gold, Treasury bills, and short-term bonds.
Conversely, Bitcoin, still viewed as a volatile macro asset, finds itself collateral damage amid this migration to safety.
However, the current scenario comes with additional complexities.
Unlike in 2018, Bitcoin is no longer solely a retail-driven asset but a regulated class with substantial ETF appeal and transparent derivatives markets.
Still, James Butterfill, head of research at CoinShares, had cautioned in February that the immediate effects of tariffs would be “undeniably negative” for Bitcoin.
Butterfill noted that tariffs hinder growth, elevate inflation expectations, and ignite risk aversion. Under these market conditions, Bitcoin reacts to liquidity trends, leading to short-term volatility.
Traders are increasingly convinced that the likelihood of a sustained Bitcoin uptrend this month is low.
On Polymarket, the odds of Bitcoin reaching $130,000 by the end of the month have dropped below the chances of it falling to $95,000, illustrating how macroeconomic policies are influencing sentiment in the digital asset landscape.
Nonetheless, Butterfill also highlighted that Bitcoin historically recovers quicker than equities in stagflation scenarios.
He stated:
“In the long term, Bitcoin’s role as a hedge could be reinforced, especially if tariff measures precipitate economic instability.”
Structural transformation
Meanwhile, analysts at Bitunix informed CryptoSlate that Trump’s announcement has intensified the economic confrontation between the two nations and reshaped global risk perceptions.
They observed that this impact is twofold: a short-term liquidity shock and a medium-term structural shift regarding capital’s view on decentralized assets.
In the short term, increased uncertainty prompts institutions to minimize risk. Funds are reallocated towards cash equivalents and gold, leading to extensive sell-offs in high-liquidity markets like crypto.
They indicated that leveraged traders facing margin calls would exacerbate this sell-off. This very situation triggered last week’s $20 billion liquidation event.
However, beyond the initial volatility lies a different calculation. If the trade conflict remains confined to tariffs and export controls, decreased global growth could hamper crypto demand.
Nonetheless, Bitcoin could emerge as a geopolitical hedge if the conflict expands to financial settlement systems. In such a case, the U.S. might impose restrictions on cross-border dollar access or payment systems, compelling investors to look for alternatives.
In this scenario, digital assets could shift from “risk assets” to “alternative reserves.” As the Bitunix team articulated:
“A decline in trust in the U.S. dollar system could bolster Bitcoin’s image as a ‘de-dollarization’ and ‘alternative value reserve’ asset, providing structural support.”
