Jeff Park, Head of Alpha Strategies at Bitwise Asset Management, stated that a prolonged tariff war could have a substantial positive impact on Bitcoin over time.

Over the weekend, President Donald Trump imposed tariffs on Canada, Mexico, and China.

Tariff War: Good for Bitcoin?

President Trump has imposed a 25% tariff on imports from Canada and Mexico. Additionally, a 10% tariff on Chinese goods and a 10% tariff on Canadian energy resources are implemented. According to the BBC, Canada and Mexico have also announced plans to impose retaliatory tariffs.

In a recent post on X, Park outlined the Triffin dilemma and President Trump’s personal objectives to explain Bitcoin’s long-term rise.

“Tariffs might be just a temporary tool, but the permanent conclusion is that Bitcoin is not only going higher—but faster,” Park wrote.

Park elaborated that the Triffin dilemma stems from the US dollar’s status as the world’s reserve currency, granting it an “exorbitant privilege.” This privilege results in three structural effects: an overvalued dollar, a persistent trade deficit, and lower borrowing costs for the US government. 

While the US benefits from cheaper borrowing, it seeks to correct the imbalances of an overvalued dollar and continuous trade deficits. Therefore, Park suggests that tariffs are being used as a negotiation tactic to push for a new international agreement. This, he argues, is similar to the 1985 Plaza Accord, aimed at weakening the dollar.

Moreover, Park argues that Trump has a personal stake in this strategy. Given his heavy exposure to real estate, his primary objective is to bring down the 10-year Treasury yield. 

In a scenario of a weaker dollar and falling US interest rates, risk assets in the US could surge while foreign economies struggle with rising inflation and currency devaluation. Faced with financial instability, Park predicts global investors will turn to alternative assets.

“The asset to own therefore is Bitcoin,” Park noted.

He emphasized that as economic tensions escalate, Bitcoin’s ascent will accelerate.

President Trump’s Tariffs Spark Crypto Market Collapse

Meanwhile, the threat of a trade war sent the crypto market plunging. Over the past few hours, Bitcoin briefly dropped to a minimum of $91,281, while Ethereum fell as low as $2,143. This has resulted in billions being wiped from the market

According to Coinglass, total liquidations exceeded $2.23 billion within the past 24 hours. 

“Worst liquidation event in history in a single day,” crypto analyst Miles Deutscher posted on X (formerly Twitter).

Deutscher added that it was worse than the LUNA and FTX collapses, which saw $1.6 billion in liquidations.

Of the total liquidations, $1.88 billion came from long positions and $349.81 million from short positions. In total, 726,788 traders were liquidated.

Senator Cynthia Lummis has stated that the Strategic Bitcoin Reserve could serve as a financial safeguard and a means to address past generations’ fiscal mismanagement. 

Lummis believes such a reserve could help rectify the economic burdens placed on younger generations, particularly the national debt.

Senator Lummis’ Bitcoin Reserve Push

In a recent interview, Lummis explained that a Strategic Bitcoin Reserve could cut the current debt in half. In 2025, the US national debt is over $36 trillion.

Lummis suggested the US could leverage Bitcoin’s appreciation to support the US dollar as the world’s reserve currency. She considers it crucial for maintaining economic stability and favorable trade advantages.

“It ensures that the US dollar is the most accepted currency worldwide, and then with Bitcoin underpinning it and being also a global means of exchange and store of value, gives us that double support for the US dollar,” Lummis said.

In addition, she referenced Bitcoin’s historical annual growth rate of approximately 55%. However, she acknowledged that this rate will gradually decline. According to Lummis, it could decrease to 45%, 35%, 25%, and so on over the next two decades. 

Despite a declining growth curve, the Senator believes a $1 million Bitcoin reserve today could be worth roughly half of the US national debt in 20 years. She also noted that Robert F. Kennedy Jr. used a similar model. Therefore, Lummis projected that a larger reserve could potentially eliminate the entire debt.

“I look at a Strategic Bitcoin Reserve and its ability to grow and help me right the wrongs that my generation did by driving us into this terrible debt. It’s the only vehicle I see that can have that consequential effect,” she said.

On July 31, 2024, Senator Lummis introduced the BITCOIN Act, proposing the establishment of a 1 million Bitcoin reserve. Last month, she also became the first chair of the Senate Banking Subcommittee on Digital Assets.

Meanwhile, support for a Strategic Bitcoin Reserve is growing. At the state level, 15 states have publicly endorsed it, Satoshi Action Fund’s founder, Dennis Porter, shared on X (formerly Twitter).

At least 11 states have introduced bills to establish a Strategic Bitcoin Reserve. Furthermore, Arizona and Utah have approved their proposals through committees.

According to Porter, more than 3,300 letters have been sent to Members of Congress advocating for Bitcoin to be recognized as part of a strategic stockpile. This comes after President Donald Trump signed an executive order to establish a “national digital asset stockpile” without specifying Bitcoin.