Bitcoin Bulls’ Biggest Threat: The Two-Month Tariff Ultimatum Trap
Bottom Line Up Front: Bitcoin faces its most significant risk in months as ongoing tariff uncertainty from President Trump threatens to trap the cryptocurrency below $100,000, with analysts warning that policy delays could trigger a major correction.
The Tariff Uncertainty Cycle
The cryptocurrency market finds itself caught in what analysts describe as a dangerous cycle of tariff-related uncertainty. Swyftx lead analyst Pav Hundal warns that “the biggest threat to bulls right now is that nothing changes over the next two months, and we just stay trapped in this cycle of endless tariff ultimatums.”
This ongoing uncertainty stems from President Trump’s trade policy approach, which has created a volatile environment for risk assets like Bitcoin. The digital currency has been particularly sensitive to trade-related announcements, experiencing significant price swings with each policy development.
Federal Reserve’s Delicate Balancing Act
The Federal Reserve finds itself in an increasingly precarious position as it navigates the complex interplay between monetary policy and trade uncertainty. On May 7, the Federal Reserve rate-setting committee held rates steady in the 4.25% to 4.50% range due to the rising risks of higher unemployment and higher inflation.
Hundal highlights a critical concern: there is a risk that US policymakers delay monetary easing until they get “hard data” on the impact of Trump’s tariffs, which would risk a “growth slowdown.” This cautious approach by policymakers could have significant implications for Bitcoin and other risk assets that typically benefit from looser monetary conditions.
The analyst emphasizes the Fed’s challenging position, noting that “The Fed is walking a tightrope right now.” This delicate balance between controlling inflation and supporting economic growth becomes even more complex when trade policy uncertainty is factored into the equation.
Bitcoin’s Price Vulnerability
The stakes for Bitcoin bulls are substantial. If the uncertainty remains, it will cast a shadow over risk-on markets, and “if bears have their ‘I told you so’ moment, you could see Bitcoin drop back below $100,000,” Hundal said.
Bitcoin’s recent price history demonstrates its sensitivity to tariff-related developments. When Trump initially raised the issue of tariffs in early February, Bitcoin dropped below $100,000 and remained volatile due to decisions around trade policy, pauses and announcements. It remained under that level for over three months until May 8.
Legal Challenges and Policy Responses
The tariff saga has taken several twists, including legal challenges to Trump’s authority. The US Court of International Trade blocked Trump from imposing his tariffs on May 28, arguing that he overstepped his authority. However, Trump recently doubled tariffs on foreign steel and aluminum to 50%.
These developments illustrate the ongoing nature of the uncertainty, with legal battles and policy adjustments creating a constantly shifting landscape that makes it difficult for investors to gauge the long-term direction of trade policy.
Inflation Target Under Threat
The tariff uncertainty has broader economic implications beyond Bitcoin’s price movements. Hundal said the uncertainty may have jeopardized reaching the inflation target this year. “Six months ago, a 2% inflation target looked possible; today, it is under longer-term threat from tariffs,” he said. “The US is at a macro crossroads.”
This shift in inflation expectations could have lasting implications for monetary policy and, by extension, for Bitcoin and other risk assets that are sensitive to interest rate changes.
The Bullish Scenario: Path to $120,000
Despite the risks, analysts see potential for significant upside if the current uncertainty resolves favorably. Hundal said the best-case scenario is an end to the “tariff sabre rattling” as that will create a “glide path” for Bitcoin to reach $120,000 in June.
This optimistic scenario aligns with broader market expectations from other analysts. Earlier, Bitfinex analysts told Cointelegraph that Bitcoin may surge to new all-time highs above $115,000 in July if institutional buying continues and US job data is “weaker-than-expected.”
The logic behind this bullish outlook centers on monetary policy expectations. The analysts said a “softer-than-expected” report could reinforce the “disinflation narrative” and encourage the Federal Reserve to consider reducing interest rates sooner, which would be bullish for Bitcoin.
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Market Dynamics and Institutional Interest
Bitcoin’s performance over the past year demonstrates the underlying strength in the market despite recent volatility. According to the data, Bitcoin has gained 47.66% over the past 12 months, indicating robust long-term demand even amid short-term uncertainty.
The potential for continued institutional buying remains a key factor in Bitcoin’s price trajectory. Institutional investors have been increasingly viewing Bitcoin as a hedge against inflation and currency debasement, though their appetite may be dampened by ongoing policy uncertainty.
Looking Ahead: Critical Two-Month Window
The next two months represent a critical period for Bitcoin and the broader cryptocurrency market. The resolution of tariff uncertainty could determine whether Bitcoin breaks through to new all-time highs or faces a significant correction back below key psychological levels.
For Bitcoin bulls, the challenge lies in navigating this period of uncertainty while positioning for potential upside if trade tensions ease. The market’s sensitivity to policy announcements means that any significant development in trade negotiations could trigger substantial price movements in either direction.
The broader economic implications of this tariff uncertainty extend beyond Bitcoin, potentially affecting the Federal Reserve’s monetary policy timeline and the overall health of risk assets. As Hundal notes, the US economy stands at a macro crossroads, and the decisions made in the coming months could have lasting implications for both traditional and digital asset markets.
Key Takeaway
Bitcoin faces a critical juncture where ongoing tariff uncertainty poses the greatest threat to continued bullish momentum. While the potential for significant upside exists if trade tensions resolve, the risk of extended uncertainty could trap Bitcoin below key levels and trigger broader market corrections. The next two months will likely determine whether Bitcoin can break through to new highs or face a significant pullback.
