President Trump’s so-called Liberation Day last Thursday saw chaos in the financial markets with some £2trillion wiped off the value of stocks as panic spread among investors in London, Europe, Asia and Wall Street. The mayhem continued this week – with the FTSE 100 initially falling 6 per cent on Monday after the president described his tariffs as ‘medicine’.

There are fears that the huge tariffs imposed on America’s trading partners, will mean firms will find it harder to do business abroad and the fall in trade will lead to global economic recessions.

Despite crypto fortunes being linked to the effects of tariffs, experts believe as the digital currency is not being directly hit by them – unlike foreign companies – there is less reason to be nervous about Trump’s taxes.

Yet while digital currencies such as Bitcoin have so far been weathering the storm, others, such as Dogecoin, have been tanking. What impact do experts expect tariffs to have on crypto and should you buy or sell?

CASHING IN

Trump announced in March the creation of a crypto reserve for the US. He surprised many by including alternatives to Bitcoin, including Ethereum, Solana, Cardano and XRP. At the time Trump posted on social media ‘I will make sure the US is the Crypto Capital of the World’ but was scant on the details.

Just one month later crypto experts say concerns about looming recessions are having a knock-on effect with crypto holders, many of whom are cashing in. This drop in demand for crypto is causing digital currency prices to fall.

Chris Beauchamp, an analyst who studies cryptocurrencies at IG Markets, says: ‘The stock markets are tumbling as investors reduce their exposure to risk in preparation for the worst. In turn, crypto investors are hoping to limit their risk from a market collapse by cashing in their digital currencies. This is to ensure they have ready money to afford those day-to-day bills.’

Crypto is priced in dollars so if the dollar falls – as it has been since the tariff announcement – the cost of digital currencies goes up for those not living in the US.

Trump announced in March the creation of a crypto reserve for the US. He surprised many by including alternatives to Bitcoin, including Ethereum, Solana, Cardano and XRP

‘A lot of people piled into crypto in a wave of euphoria when Trump was elected President,’ says Beauchamp. ‘This tariff announcement has been a wakeup call for some who are now not happy – especially as there are signs that there could soon be a trade war. China retaliating with its own tariff threats on Friday, saying it would put a 34 per cent tariff on American goods. There is also something that doesn’t smell right for many people about the relationship between Trump and crypto – and they have decided enough is enough and want to get out.’

CROSSROADS

The market turbulence caused by the tariff announcements will eventually settle down and crypto experts believe it is worth waiting to see what happens over the next few days before making any major moves.

Glen Goodman, author of bestselling book The Crypto Trader, says: ‘We are standing at a crossroads. Not just for crypto but stocks and shares as well. Is the sense of market panic being overdone? It is possible Trump is making a lot of noise by threatening countries with tariffs because he wants to negotiate to get a better trade deal for American businesses – and the tariffs will eventually be withdrawn.’

Goodman believes a key reason crypto currencies have been hit following the tariff announcements is that institutional investors lump digital money in with the technology sector – which is expected to suffer if the tariffs have a knock-on effect for prices of technology items imported from countries such as China and India.

China has been hit with a 34 pc tariff, India 26 pc, while members of the European Union have been stung with 20 pc charges for goods to US. Britain was hit with a tariff rate of 10 pc for exporters. Many higher custom tariffs are due to come into effect from Wednesday April 9.

OPPORTUNITIES

The fortunes of crypto maybe tied up with the tariffs – but Goodman believes this does not mean this is a time to sell digital currency such as Bitcoin and that once the initial shock subsides there might be a buying opportunity. He says: ‘There has been a lot of chatter on social media among crypto traders. Most of the talk is on when might be the best time to buy, rather than if it is time to sell.’

Beauchamp says: ‘Crypto has never been for those of a nervous disposition and there are bound to be some choppy days. Anyone interested should only drip feed small amounts of money initially to get a better understanding of what is going on in the cryptocurrency market. This is particularly important during these times.’

BITCOIN

Bitcoins are mined using super-powerful computers that go through mathematical permutations in search of a hidden code

The price of the most popular digital currency, Bitcoin fell more than 7 pc from about $87,870 on Wednesday evening to $81,302 on Thursday. After a slight recovery it had fallen fallen back to $76,515 on Monday – and over a full week was down about 6 pc. This is a long way off the highs of more than $100,000 at the start of the year.

Plotting the performance of the so-called ‘magnificent seven’ tech stocks – Alphabet (Google), Amazon, Apple, Meta (Facebook), Microsoft, Nvidia and Tesla – over three weeks, Goodman says that combined they have fallen in value by more than 6 pc. Over this same period Bitcoin has moved from about $77,000 to about $76.515 – so not lost much ground despite falls after the tariff announcement.

Goodman says: ‘The statistics show that investors are more worried about the future of the biggest tech companies on the planet than about the future of Bitcoin.’

The tariffs on China could also have a knock-on effect pushing up costs of mining for new Bitcoin, which could keep the value of the digital currency higher. Bitcoins are mined using super-powerful computers that go through mathematical permutations in search of a hidden code. Some computer technology for this is made in China. The number of Bitcoins will never exceed 21million because this is how many have been programmed to exist. So far about 20million have been mined.

Three-quarters of the 20million Bitcoins in existence are held by long-term buyers. Beauchamp says: ‘This group of people are known as “hodlers” – which stands for “hold on for dear life”. They may feel sick when markets fall but over time their patience has more than paid off – and the tariff hikes will not change their minds.’

COINS AT RISK

Over the seven days to Monday April 7, the Bitcoin price had fallen about 6 pc. In the same period Ethereum had tumbled 16 pc, XRP was down 13 pc, Solana dropped 18 pc and Dogecoin fell 14 pc, according to crypto-tracking site CoinMarketCap.

Experts believe that a key reason for this greater fall for other crypto currencies is that Trump announcing tariffs across the globe affected the appeal of digital currencies. However, as Bitcoin is so well-established it is less vulnerable.

Among those most connected with the presidency is the Elon Musk-backed Dogecoin. Although Musk is not behind this crypocurrency, he is a long-standing vocal supporter – posting on social media in 2019 ‘Dogecoin might be my fav cryptocurrency. It’s pretty cool.’ This single tweet doubled the value of the digital money at the time.

The billionaire has been a major supporter of Trump and also hired as a ‘special government employee’ charged with cutting government bureaucracy using a DOGE taskforce. There are also concerns about their working relationship and following the tariff announcement it could become more strained.

So, are the experts investing in crypto right now – or selling up?

Goodman says: ‘Honestly, it is business as usual for me. The prices of crypto are always volatile – it just part of the game. I am certainly not going to be selling up because of the tariff announcements and will be trading just as before.’