When It 'Riffs, It Pours
Key Takeaways
- The start of US tariffs bring risk markets lower and increase USD strength
- An eventual planned USD devaluation would be a boon to hard assets
- Bitcoin miner revenues decline while AI & HPC mania also cools swiftly
Digital Asset Commentary
President Trump kicked off the initial salvo of tariffs on Canada, Mexico and China this weekend, citing a national emergency on the flow of fentanyl and undocumented immigrants into the US. Trump also hinted at eventual tariffs on EU goods as well. Investors sold risk assets in response, which once again leaves Bitcoin and digital assets in the cross hairs. Weekends are also typically a lower liquidity environment, amplifying the market move. Predictably, retaliatory tariffs from Canada on US goods were announced with a similar response likely from both China and Mexico. A global trade war brings a significant uptick in headline risk and uncertainty for risk assets. Despite the recent significant progress in inflation, a jump in the cost of goods could also lead to a rise in inflation throughout 2025. The silver lining of the repeated volatility scares via tariff headlines is an eventual USD devaluation. However, the path to a potential Plaza Accord 2.0 will likely be a rocky and arduous one. Bitcoin miners are also in a challenging position. Hash rate and difficulty continues to sit near ATHs while Bitcoin transaction fee revenue and a drop in expectations of High-performance Computing (HPC) revenue are both falling. Collectively, this suggests miners are headed for lean times over the next few weeks, especially if BTC prices continue to drop. A bearish outlook for miners can lead to a potential further bearish outlook for BTC, as miners sell BTC to cover costs. The rise of stablecoins and the proliferation of BTC ETFs also play a role in the decreasing reliance of using BTC onchain.
