On March 27, cryptocurrency values experienced a slight downturn following Donald Trump’s early announcement of Liberation Day for global automakers.
Bitcoin (BTC) dropped below $86,000, as the overall cryptocurrency market capitalization, according to CoinMarketCap, fell by 1.67% to reach $2.83 trillion. The crypto fear and greed index remained in the fear territory at 38.
This retreat in digital assets reflected declines in traditional markets, with futures linked to the Dow Jones, Nasdaq 100, and S&P 500 all showing decreases of over 0.70%.
The primary driver behind this decline was Trump’s decision to implement sweeping tariffs on all vehicles and components imported into the United States. These new levies are projected to impact all automakers, including domestic companies, due to added duties on steel, aluminum, and automotive parts.
The automotive sector plays a crucial role in the U.S. economy, employing over 150,000 individuals directly, excluding those in supply chains and dealerships. The newly imposed tariffs could create challenges for these firms and may lead to layoffs in the near future.
Simultaneously, these tariffs are anticipated to increase vehicle prices, leading many consumers to postpone their purchases. Recent statistics indicate a significant drop in U.S. consumer confidence, which has decreased by 17 points over the last three months.
Trump’s wider tariff strategy is expected to be detailed on Liberation Day, where he is likely to announce reciprocal tariffs on more imports.
How Liberation Day Could Positively Impact Bitcoin and Altcoin Values
Trump’s tariff policy could be perceived as a Black Swan event due to its wide-reaching impact and potential to disrupt the economy. For instance, his suggested 25% tariffs on imports from Mexico and Canada could interrupt trade among three nations that have benefitted from decades of tariff-free relations.
The concern is that these tariffs might precipitate a recession this year. According to a recent article, an economist from Moody’s pointed out that the likelihood of a recession in the U.S. is increasing.
Interestingly, contrary to popular belief, a recession might actually favor Bitcoin and other altcoins, primarily due to anticipated fiscal and monetary responses. During previous economic downturns, the Federal Reserve intervened with aggressive policy measures, providing a $700 billion bailout during the 2008–09 financial crisis and trillions more during the COVID-19 pandemic.
Similar actions could be on the horizon if the economy falters in 2025. Trump may pursue targeted assistance for farmers and automakers affected by his own tariffs, while the Fed could react with interest rate cuts and quantitative easing measures.
With benchmark interest rates currently at 4.50%, the Fed has the capacity to lower its policy stance. Reduced borrowing costs and a renewed appetite for risk could spark another cryptocurrency bull market, reminiscent of the surge seen in 2020–2021.