President Donald Trump’s proposed tax cuts and aggressive tariff hikes have shaken the cryptocurrency market, with increased volatility and a slew of ETF-related Bitcoin sell-offs over the past few weeks. The one big question is, “Will BTC explode if Trump removes income tax for Americans earning less than $150K?” Trump’s tax reform plan calls for the end of income tax for Americans earning less than $150,000. This would increase disposable income for 93% of Americans, benefiting both consumers and businesses. Moreover, Trump wants to make the 2017 Tax Cuts and Jobs Act (TCJA) permanent, which includes keeping the top income tax rate capped at 37% while tips, overtime pay, and Social Security benefits are not taxed. Although such measures could boost spending and investment, they come at a heavy price—an estimated revenue loss of $4.9 trillion over the coming decade, according to the Penn Wharton Budget Model. To compensate for this shortfall, Trump has imposed sweeping tariffs: a 20% universal rate and a 60% tariff on Chinese imports. The protectionist measures are projected to raise $3.3 trillion in revenue. Still, the Peterson Institute for International Economics has warned that they are likely to dampen GDP growth and further stoke inflation. “I think what it does is generate revenue and drive growth,” Commerce Secretary Howard Lutnick told CBS News on March 12 , “and then turns around and gives you the ability to free up capital to buy other assets, including potentially Bitcoin.” However, the risk assets, especially crypto, got rattled by the economic uncertainty brought by tariffs. Trump’s policy announcements shake up the crypto market Sharp swings in the price of Bitcoin have followed Trump’s policy announcements. After the first tariff threat on February 1, BTC fell 12.38%, dipping from $105,000 to $92,000. An 8.7% bounce with braces on the Mexican tariffs on February 3 returned Bitcoin to $100,000. Another drop came on March 3, when new tariffs were ratified, and BTC lost 8.79% to $86,500. Bitcoin fell 14.45% further to reach $78,225, as tariffs were fully implemented on March 5. A 5% drop from $89,200 to $84,600 occurred on March 7, the day the Strategic Bitcoin Reserve was signed. By March 17, Bitcoin had dropped 13.68% from $109,000 to $85,000 as tariff pressure continued. Simultaneously, according to Bloomberg, U.S. Bitcoin ETFs saw never-before-seen outflows of $5.5 billion in a five-week sprint, reflecting growing investor anxiety around the trade war risks. The director of derivatives at Amberdata, Greg Magadini, said that Bitcoin and the rest of the cryptocurrency market are closely correlated to macro conditions, adding that he does not see the near-term decoupling of Bitcoin from risk assets. Bitcoin reserves are driving significant transformations in the crypto market In a historic move, Trump established the Strategic Bitcoin Reserve on March 6, repurposing 200,000 BTC worth $17 billion from seized assets. While this bolstered Bitcoin’s legitimacy at the federal level, short-term market reactions have been mixed. The possibility of inflation induced by tariffs could make Bitcoin an appealing hedge, which also causes volatility in the near term. Analysts at ABC News suggest that while Bitcoin could benefit as a long-term store of value, immediate investor sentiment remains cautious. Beyond Bitcoin, other cryptocurrencies, like Ethereum and Solana, which belong to the U.S. Digital Asset Stockpile, can gain popularity if economic turbulence persists. But, as the Stanford Institute for Economic Policy Research pointed out this week, the bigger risk of a protracted trade war could sour investors on financial markets in general. Francois Villeroy de Galhau, Governor of the Bank of France and a key European Central Bank (ECB) member has warned that the U.S.’s growing embrace of cryptocurrencies could threaten global financial stability. Speaking in an interview with French weekly La Tribune Dimanche, Villeroy de Galhau criticized the Trump administration’s policies, claiming they are “sowing the seeds of future upheavals.” He noted that crises often begin in the U.S. and spread worldwide, warning that the U.S. is jeopardizing financial stability by encouraging non-bank finance and crypto assets. The ultimate impact of Trump’s tax cuts and tariffs will depend on how they shape economic activity. BTC could benefit from increased investment if tax cuts stimulate enough growth to offset inflationary pressures. However, if prolonged trade tensions deepen economic uncertainty, risk assets—including Bitcoin—could face heightened volatility.
