Tariff Shock Countdown: How to Position Crypto Assets Amid Intensifying Global Trade

What is “tariff shock” and its key mechanisms

The “tariff shock” refers to the situation where the government causes significant fluctuations in the macro economy and market sentiment by dramatically increasing import taxes (tariffs) or suddenly adjusting trade policies. Recently, the Donald Trump administration announced a 100% tariff on exports to China, along with export controls, marking a new phase in the trade conflict. Its mechanism can be summarized in three points: first, increasing costs and stimulating inflation; second, exacerbating economic uncertainty and damaging risk asset preferences; third, disrupting global supply chains and weakening expectations in technology and blockchain-related industries. These mechanisms ultimately transmit to the market through three pathways: “tightening liquidity + declining risk preference + leveraging liquidation.”

Why has the encryption market become a “victim” of tariff policies?

Although encryption assets are not physical trade commodities, their prices are highly sensitive to changes in macro risk appetite. As a typical high-risk, high-volatility asset, encryption assets often bear the brunt when “tariff shocks” lead to an increase in risk aversion. Data shows that on the day tariff news was released, the price of Bitcoin significantly fell. Furthermore, clearing data indicates that billions of dollars in encryption leveraged positions were forcibly liquidated within just a few hours. Moreover, when tariffs raise inflation expectations and delay interest rate cuts, liquidity expectations are damaged, forcing risk assets, including the encryption market, to give way.

Recent data analysis: price, capital flow, and liquidation situation

The recent situation can be explained by the following points:

• In terms of price, Reuters reported that on the day the tariff escalation news was released, Bitcoin fell to around $104,782, a decrease of about 8.4%. Ethereum also dropped by about 5.8%.
• In terms of market capital flow, according to the Times of India, the global encryption market value evaporated by nearly 4% (about $3.75 trillion in scale) following relevant tariff news, reflecting an escalation in market risk aversion.
• In the clearing situation, it has been reported that over $2 billion worth of long-term encryption positions were forcibly liquidated in a short period, becoming one of the largest single-day liquidations in history. These numbers reveal that not only were prices affected, but the market structure and funding chain also quickly shook under the impact of tariffs.

Layout suggestions: How to adjust your encryption asset portfolio in the era of tariffs

In light of the above situation, the following strategies are recommended:

• Phased entry in batches: If you are optimistic about long-term encryption assets, you can wait for tariff risks to ease or market sentiment to improve before building your position in batches, avoiding a one-time high-level entry.
• Leverage should be used with caution: the current risk of leveraged trading is extremely high, and it is recommended to reduce leverage or temporarily revert to holding spot.
• Lock in profits or reduce risk exposure: For existing profitable positions, consider appropriately locking in some profits and reducing exposure to respond to a possible new round of tariff escalation.
• Pay attention to macro indicators: including the progress of trade negotiations, whether the government introduces a “tariff dividend” (cash stimulus) plan, interest rate trends, etc. If there are signals of easing, it may be an opportunity for the encryption market to rebound.
• Diversification of asset allocation: encryption is only a part of the overall allocation and it is not advisable to invest all funds in it. It can be paired with low-risk assets such as gold, bonds, and cash.

Conclusion: Key Variables and the Next Market Turning Point

In the future, whether the encryption market can see a recovery depends on the following key variables:

• Whether trade frictions continue to escalate or show signs of easing.
• Has the government initiated measures similar to “tariff dividends” or other fiscal stimulus measures to provide liquidity support for risk assets?
• Whether the interest rate path is suppressed or downward, if interest rates remain high for a long time and liquidity is tight, encryption assets may continue to be under pressure.
• When will market sentiment shift to a “risk appetite” mode? When investors are willing to take on risk again, encryption assets may become a hot spot for the return of liquidity.

In summary, we are currently in a highly uncertain macro environment, and “tariff shocks” have become an unavoidable variable in the encryption market. For investors, it is essential to be wary of downside risks while also seizing potential opportunities following policy releases. It is advised to remain calm, diversify investments, and respond flexibly.