Donald Trump’s victory in the US Presidential election brings with it the probability of increased tariffs. That means a higher price to pay for goods and services in response to countries that unfairly charge the US a higher price. China is at the top of the list of countries that could feel the heat.
The crypto segment also features on the list as chances are that the Federal Reserve may hesitate to cut rates at the desired pace in the future.
Trump to the Rescue?
Trump’s intentions are to protect the economy of the US by boosting national manufacturing. However, retaliatory measures are harsh to the extent that they could reprise the inflation concerns. A higher rate or a slow cut in the rates would mean that investors have little borrowing power with them.
That would make funds more expensive to acquire and more expensive to allocate to something risky. This is where cryptocurrencies enter.
Digital tokens last surged when the Federal Reserve cut rates by 50 bps. This dates back to September 2024. The Federal Reserve is likely to cut rates again on Thursday but it has not hinted at the level to which it will slash the rates. Earlier records showed less possibility of a 50 bps rate cut but the Federal Reserve did that nonetheless.
Advertisement
It was signaled that two more cuts will happen in 2024. Nothing was reported in October and the year is only left with November and December. This means that two cuts would come consecutively.
Assuming Donald Trump does stand true to his commitment to waging a tariff war with other countries. The Federal Reserve could be forced to slow down its measures. A quarter cut is anticipated to happen this Thursday. It may happen without any change, but the one that is tentatively scheduled to happen in December could see a different number altogether.
For reference, a higher rate discourages investors from borrowing funds. This affects their allocation to risky assets like crypto. It, thereby, brings down the liquidity of the market. The higher they are able to inject, the better it is for the crypto market. R
ate cuts at a slower pace would translate to less borrowing power and, hence, less allocation, which would further lead to insufficient liquidity or liquidity at a less-than-expected level.
Prices of digital tokens like BTC and ETH will reflect this by slowing down. Bitcoin tokens, for one, were estimated to reach $150,000 at full throttle of aggression. That could come down a notch with a restriction on just a $100k milestone.
One way in which the current political scenario can work best for the crypto segment is if there is a more supportive environment for it. Whales are accumulating BTC and PEPE with hopes of taking profits home later this year.
Advertisement
Memecoins are rising, and so are Trump-themed politico meme tokens. It only remains to be seen how seriously Donald Trump executes his commitment to increasing tariffs for international trade.
Also Read: Solana & Ethereum Pair $SOL/ETH Reaches New All Time High
