Prolonged trade tensions have caused Bitcoin to fluctuate wildly in the past few days

Trade War and Its Impact on the Crypto Market

The escalating trade tensions between the US, Canada, Mexico, and China have created significant volatility in the financial markets, including the crypto market.

New Tariffs Imposed

• US: Imposed a 25% tariff on imports from Mexico and Canada (excluding energy), 20% on China, and 10% on energy from Canada.

• Canada: Imposed retaliatory tariffs of 25% on $20.7 billion worth of US imports, expected to expand to $86.6 billion within 21 days.

• China: Imposed 10%-15% tariffs on imports from the US.

This is considered the largest escalation of the trade war since the Great Recession, affecting around $1.3 trillion worth of US goods.

Impact on Crypto

The imposition of tariffs on imported goods could reduce liquidity in the financial markets, thereby affecting the flow of capital into the crypto market. Large investors may reduce their exposure to Bitcoin and altcoins to shift towards traditional investment channels like gold or government bonds, putting downward pressure on the market.

However, some experts believe that these economic tensions could actually be a catalyst for Bitcoin to prove its role as a "digital gold" – a safe-haven asset during times of instability.

Is Trump About to Make a U-turn?

The trade war developments have been shaking the financial markets. Initially, former President Donald Trump was adamant about maintaining the high tariffs on Mexico and Canada after a month-long delay to negotiate. However, immediately after the US tariffs took effect, Canada retaliated, escalating the trade tensions.

Just a few hours later, US Commerce Secretary Lutnick unexpectedly announced that Trump may soon announce a concession deal with Canada and Mexico. This has led investors to wonder: Is the US government trying to defuse the situation to avoid an all-out trade war?

If a concession deal is reached, the financial markets could recover, leading to a positive sentiment for Bitcoin and other risky assets. Conversely, if the tensions continue to escalate, Bitcoin may continue to be sold off as investors seek safer havens. Reacting to the volatility in trade policies, Bitcoin has been fluctuating wildly between around $79,000 and $95,000.

Mexican Billionaire Bets Big on Bitcoin

In a bold move, billionaire Ricardo Salinas, one of Mexico's wealthiest individuals, has confirmed that 70% of his investment portfolio is entirely in Bitcoin. The remaining portion is allocated to gold and shares of gold mining companies. This marks a complete departure from traditional government bonds and corporate stocks, which have long been considered the safe investment foundation for the elite.

Salinas is the chairman of Grupo Salinas, a large conglomerate operating in the financial, media, and retail sectors. With an estimated net worth of around $5.8 billion, he is not only one of Mexico's richest businessmen but also one of the most vocal proponents of Bitcoin. As early as 2020, he expressed his desire to transform his bank into the first in Mexico to accept Bitcoin as a legal means of transaction.

Salinas' bet on Bitcoin not only reflects his personal faith in this digital asset but also mirrors a broader trend among many large investors worldwide. As traditional economies face inflationary pressures and geopolitical tensions, more and more individuals and institutions are choosing Bitcoin as a long-term store of value.

El Salvador Remains Determined to Accumulate Bitcoin Despite IMF Warning

While Bitcoin remains a controversial topic globally, El Salvador continues to demonstrate its steadfastness with this digital asset accumulation strategy. When Bitcoin's price dropped below $90,000, the government quickly purchased an additional 19 BTC, bringing the total Bitcoin held by the country to 6,081 BTC, worth around $600 million.

However, this decision has not been well-received by the IMF (International Monetary Fund). The IMF has warned that if El Salvador continues to accumulate Bitcoin, the country may face difficulties in borrowing $1.4 billion from the financial institution. To appease the IMF, the El Salvadoran government has adjusted the Bitcoin law, removing the legal tender status of the digital currency. Nevertheless, this has not stopped President Nayib Bukele from continuing to bolster the country's Bitcoin reserves.

The question arises: Why is El Salvador so persistent with its Bitcoin strategy despite international pressure? One of the key reasons is the belief that Bitcoin will continue to appreciate in the long run, bringing significant financial benefits to the country. Furthermore, the accumulation of Bitcoin also helps El Salvador create a pioneering image in the cryptocurrency field, attracting investment from businesses and individuals interested in blockchain technology.

Conclusion

From a Mexican billionaire's large Bitcoin bet to El Salvador's continued Bitcoin purchases despite IMF warnings, and the escalating trade war between global powers, the financial world is entering a period of heightened instability. The combination of these factors could lead to profound changes in the crypto market, making Bitcoin the focal point of discussions around safe-haven assets.

Will Bitcoin be able to maintain its role as the "digital gold" or will it face selling pressure due to unstable economic conditions? The developments in the coming days will determine the next trend of the market.

VIC Crypto summary

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