Bloomberg Opinion: Is the Dollar About to Burst? Bitcoin's Reaction to Tariffs Reveals Major Concerns

The real crisis does not stem from international trade disputes or recession expectations, but from the fact that something may be wrong with the US "dollar" itself. This article is based on an article by Bloomberg financial researcher Aaron Brown and is compiled, compiled and contributed by BitpushNews. (Summary: U.S. and EU tariff negotiations are deadlocked, bitcoin falls below $84,000, U.S. stocks fall) (Background supplement: White House digital asset official: The United States may use tariff revenue to buy bitcoin with all its might! Since U.S. President Donald Trump announced the "Liberation Day" tariff policy on April 2, the increasing correlation of stocks and cryptocurrency assets has become a focus for investors. This has been interpreted by some as evidence that the initial tariff policy was not "good" and that delaying its implementation was "good" because there may be fears that tariffs would lead to a recession. Unfortunately, much of the analysis sounds more like partisan argument than sober economic analysis. If we dig deeper into the trajectory of time, we find a more dangerous signal: the real crisis is not from an international trade dispute or recession expectations, but from a possible problem with the US dollar itself, which is worrying. Recently, financial markets seem to have gone through three reaction phases. S&P 500 and Bitcoin price movements since the April 2 tariff announcement, Source: Bloomberg and CoinMarketCap, Note: April 2 = 1.0 After-hours trading on April 2 and the following two days were driven by concerns about disruptions to financial markets, trade flows, and international relations – bad for stocks and positive for cryptocurrencies. Over the weekend and until Trump's partial reversal on April 9, investors turned to fears of a global recession. Since this shift, concerns seem to have focused on the value of the dollar. All this should be coupled with the qualification that it is dangerous to interpret market movements immediately after they occur. Understanding what the market is saying – it can take months or even years, and we often never figure it out. The market is trying to value cash flow for decades to come, and with so much change happening at this moment, the factors that affect the stock market today tend to be in the headlines much later. One exception is news of certainty, such as the Federal Reserve's interest rate decision, the release of key economic statistics, and natural disasters. We know when the market gets informed and can gauge the reaction in seconds or minutes without being affected by the noise accumulated by trading for a day or more. But Trump's tariff news doesn't meet many criteria, including the complexity of the tariffs, which takes time to digest and assess the response. The initial reaction to the Liberation Day announcement was to fall less than 1% in the first 10 minutes of after-hours trading, but the S&P 500 plunged 10.5% over the next two days. Bitcoin was rising at the time. These movements come as markets digest foreign reactions and conduct a more thorough analysis of the consequences. In addition, there are important indirect effects. The aggressive tariffs suggest that Trump will act more quickly and forcefully — perhaps recklessly — in his overall plan, including cost-cutting, deregulation and enhanced immigration enforcement through government efficiency departments. Such a major unilateral action seems likely to undermine international cooperation and goodwill. During the weekend, something changed – the second phase. The stock market did not change much on Monday and Tuesday, but the price of bitcoin fell sharply. Trade wars, international tensions, protectionism, capital controls, and financial repression are all good for Bitcoin, but a global recession could hurt Bitcoin as much or more so as the stock market. An important context in this regard is that the global economy has been vulnerable since it began to recover from Covid. During the Biden administration, the United States was close to stagflation, and most economists predicted a recession when the Fed began aggressively raising interest rates to curb inflation. At the time of Trump's election, the probability of a recession was about 25 percent and has been rising ever since. The tariff announcement concretizes those concerns. Investors do not believe that tariffs per se will cause a recession, but that in a fragile situation, tariffs may be enough to trigger a recession and make it last longer and deeper than it originally would. Since Trump partially reversed his decision to raise tariffs on dozens of trading partners, the stock market and cryptocurrencies have been linked far more than the news can reasonably explain — the third phase. When we have seen this in the past, it was usually the US dollar that caused these fluctuations. Both stocks and cryptocurrencies are denominated in dollars, and if the dollar depreciates, they both rise; If the dollar rises, they all fall. The dollar value discussed here is not measured in terms of consumer price index (CPI) or foreign exchange rates, but refers to how investors feel about holding dollars and dollar-denominated assets (such as nominal assets such as bonds) compared to holding stocks and cryptocurrencies. Tariffs often make holding currencies less attractive relative to non-monetary assets. Americans can buy less with their dollars, and reciprocal tariffs mean foreigners can buy less with their currency. More generally, any interference with the free market devalues the currency. Conversely, when there is "risk aversion", international tensions and trade disruptions may instead make the dollar more valuable, despite a decline in its purchasing power. A more financially assertive U.S. could have the same effect on the dollar. In any case, when Trump backed down, both stock and cryptocurrency investors seemed to believe that the dollar had depreciated, so both asset types rose in tandem, and the pattern continues. Given the current volatile uncertainty, predicting when the market will enter its next sad phase and when the correlation between stocks and Bitcoin will change requires crystal ball of predictive power. What does this mean for the future? The tariff dispute could last for months, even throughout the Trump administration. The temporary suspension has eased the situation and reduced the likelihood of economic recession or major international conflict. If the U.S. government can stabilize policy, the issue may roile markets and politics for a while, like the debt ceiling/government shutdown, and then gradually seem irrelevant – even if the underlying conflict is never resolved. The deeper problem is that Trump's toughness and his willingness to listen to mainstream advisers are more important. The next time something similar happens – and I'm sure there will be a next time – I expect the stock market to react faster and more negatively, and cryptocurrencies to go up. The drama is dominated by the economics of tariffs and diplomacy. Next time, investors will see it as another episode in a long-term playbook. Why worry about the long-term economic impact of policies that change or even reverse every day? Until Trump stops or leaves the White House, politics, not economics, may be the main driver of financial market volatility. Related reports U.S. tariffs will kill bitcoin mining companies? From the tariff storm to the unexpected fall in CPI, can the Fed's interest rate cut ignite a global asset spree? Apple breathe a sigh of relief! Trump announced: mobile phones, computers and other electronic products are exempted from tariffs, iPhone does not rise? 〈Bloomberg View: The dollar is about to explode? Bitcoin's response to tariffs reveals major concerns, and this article was first published in BlockTempo's "Dynamic Trends - The Most Influential Blockchain News Media."