Bitcoin's $85K Tango with Waller's Tariff Warning A Risky Dance?

Bitcoin flirting with $85,000... again. Ether tagging along. The usual suspects – SOL, AVAX – again leading the altcoin charge. Stocks are up. Crypto stocks are up. Everything's sunshine and rainbows, right? Wrong.

Don't let the green candles fool you. But lurking below the surface is a potential economic earthquake, and its epicenter is… tariffs. Namely, none other than Fed Governor Christopher Waller floating the idea of rate cuts in response to the rekindling of Trump-era tariffs. Here’s where the story gets really interesting — and really, really dangerous.

Waller's Tariff Stance A Calculated Risk?

Waller's comments aren't just some off-the-cuff remark. The more important point is that they represent a big shift in how the Fed may view trade policy going forward. It's not just about inflation anymore. It’s all about reactivity versus proactivity and improving our ability to mitigate potential recessionary forces before they set in.

Is cutting rates in response to tariffs a smart move, or a desperate gamble? Tariffs are, at their core, inflationary. They increase the price of import goods across the board, a cost that is then borne by American consumers. Cutting rates to make up for this will just stoke inflation more, setting up a worst case stagflation scenario – stagnant growth and high inflation. Remember the 70s? No one wants a repeat of that.

So why on earth would Waller propose this at all? He’s apparently betting that the economic impact of the downturn from tariffs will be severe. His reasoning is that the deflationary pressures will be much, much stronger than the inflationary effects. Or, alternatively, he’s trying to communicate to this, and future, administrations that this is a terrible, terrible idea.

Either way, it’s a dangerous game of chicken. And with Bitcoin stuck uncomfortably in the middle, it could get caught in the crossfire and be crushed.

Bitcoin As Safe Haven A False Hope?

The narrative often goes like this: economic uncertainty = Bitcoin goes up. Tariffs create economic uncertainty. Therefore, tariffs = Bitcoin goes up. Simple, right?

While Bitcoin has the potential to serve as a safe haven asset amidst geopolitical crises, it’s no sure thing. Such a full-blown trade war, initiated by widespread tariffs, would likely lead to a global recession. In that world, folks aren’t rushing out to purchase Bitcoin. They’re not going to be “petrodollar recycling.” They’re going to be hoarding cash, selling off risk assets (like Bitcoin) to pay their bills.

Think about it: if you're worried about losing your job, are you really going to be buying Bitcoin? Or are you just going to be worried about playing defense and keeping the lights on.

Swissblock attributes this to strengthening Bitcoin network fundamentals and stabilizing institutional liquidity. That’s the positive news, those fundamentals can quickly be overtaken by a significant economic shock. A rising tide floats all the boats, tha Ragnarok drowns them all.

This leads to Bitcoin’s main fundamental question. But, importantly, not if it’s strong enough to weather a worldwide recession sparked by a trade war. I have my doubts.

So, what's the average investor to do? Panic sell all your Bitcoin? Absolutely not.

Navigating Trade's Perilous Waters

The bottom line Future of Bitcoin ultimately hinges on the outcome of global economic prosperity. And right now, the global economy is dancing on a razor's edge, with Waller's tariff warning acting as a stark reminder of the risks involved.

Don't get caught up in the hype. Do your own research. Be prepared for anything. And don’t forget, in the crypto space, there are no sure things. Particularly not a lovely tango when it comes to tariffs. And you can just imagine how quickly the dance turns into a fight.

• Scenario 1: Tariffs Implemented: This is the worst-case scenario. Expect a sharp correction in Bitcoin, potentially down to $60,000 or lower. This is when you might consider buying the dip, but only if you have a long-term perspective and a strong stomach.
• Scenario 2: Trade Deal Reached: This is the best-case scenario. Expect Bitcoin to resume its upward trajectory, potentially reaching new all-time highs.
• Scenario 3: Prolonged Uncertainty: This is the most likely scenario. Expect continued volatility in Bitcoin, as the market tries to price in the potential impact of tariffs. This is a time for caution and diversification.

Here's a table to visualize the possible outcomes.

Ultimately, the future of Bitcoin is tied to the fate of the global economy. And right now, the global economy is dancing on a razor's edge, with Waller's tariff warning acting as a stark reminder of the risks involved.

Don't get caught up in the hype. Do your own research. Be prepared for anything. And remember, in the world of crypto, nothing is guaranteed. Especially not a smooth tango when tariffs are involved. The dance could easily turn into a brawl.