Jerome Powell’s testimony earlier this week about the ripple effect caused by the uncertainty around possible tariffs contributed to market volatility in the markets. You might think, "Bitcoin is a hedge! It's supposed to thrive when the world is uncertain!" That's the narrative, isn't it? I'm here to tell you that this perceived stability – Bitcoin consolidating around $104,000-$105,000 while Ethereum dances near $2,500 – is a fragile facade. Powell’s tariff talk might be the wrecking ball.

Trade Wars Cause Bitcoin Bloodbaths?

Tariffs aren’t simply a way of raising the cost of imported, competitive goods. They’re not just about flipping one little switch on the prop. When trade slows down, companies suffer. Profits shrink. And what’s one of the very first things investors drop when their profits are in jeopardy? Risk assets.

Now, I know what you're thinking: "Bitcoin is the future! It's uncorrelated!" But let's be real. Bitcoin, even with increased adoption, is still seen as a high-risk, speculative investment by the overwhelming majority. Look at the data: trading volumes are down (11% for Bitcoin, 18% for Ethereum!), open interest in derivatives is declining, and even the Binance long/short ratio is showing fewer people betting on Bitcoin to rise. These are not the indicators of a market getting ready to boom. These are all indications of a market gripping its teeth and waiting for the next shoe to fall. That shoe could be a tariff-induced recession.

It's simple. Less global trade means less economic activity. Less economic activity means less disposable income. With fewer disposable dollars, there will be less money going into speculative assets such as Bitcoin. It’s a domino effect, and Powell’s tariff worries are the first domino to fall.

Inflation: Bitcoin's False Friend

“Ruh-roh.” Bitcoin is an inflation hedge! We’ve all heard it. That might be the case over the very long term. The short-term reality is far more nuanced and potentially catastrophic. Tariffs fuel inflation. They’re more regressive than a penny on the sales tax. They raise the cost of goods, end of story. This is not that slow creeping inflation, the kind Bitcoin would theoretically be a safeguard against. This is the type of fast, runaway, destabilizing inflation that leaves central banks with no choice but to aggressively slam on the brakes.

Think back to the Fed's recent meeting. They left interest rates unchanged for now, around 4.25%-4.50%. At the same time, they signaled slower growth and hotter inflation. That's a recipe for disaster. To offset this tariff-driven inflation, the Fed will have no choice but to raise interest rates dramatically. What happens then? At that point, bonds and other fixed-income assets look a lot more appealing. Investors take flight from riskier assets, including Bitcoin, and the perceived safety of the US dollar provides higher-yielding returns.

Don't be fooled by the narrative. Bitcoin’s claimed “inflation hedge” anti-Bitcoiners’ long-run trump card. In the near term, tariff-induced inflation is much more likely to set off a risk-off cascade.

Regulations: The Government's Bitcoin "Solution"?

Imagine this scenario: Tariffs trigger a recession. Bitcoin, rather than functioning as the great safe haven, crashes. Investors lose their shirts. What happens next? Governments step in. They’ll play the blame game, searching high and low for someone to scapegoat. And who's an easy target? The unregulated, "dangerous" world of cryptocurrency.

I’m not arguing that governments are eager for Bitcoin to go down in flames. A big Bitcoin crash might be in the cards, with or without broader economic turmoil. This would provide them with the ideal pretext to come down like a ton of bricks. Tighter regulations, closer scrutiny, and perhaps even full-blown bans may be in the pipeline. This isn't some far-fetched conspiracy theory. It’s a perfectly understandable consequence of a rotten financial system in search of a scapegoat.

Arthur Azizov’s forecast with regard to the geopolitical dimension further complicates and worsens an already challenging equation. Although the Iran-Israel conflict has so far failed to affect Bitcoin in a huge way, all it takes is one spark. Throw that into the mix with tariff uncertainty and increased regulatory burden, and there’s a perfect storm brewing.

Forget the macroeconomics, this is the shakiest I have seen the technicals in a very long time. Bitcoin's recent consolidation around $104,000-$105,000 isn't a sign of strength. It's a sign of indecision. If Bitcoin tanks below major support lines because of inflammatory news about tariffs, that’ll be a wake-up call. No doubt the market is going south. Keep a close eye on those levels. Or they might be the canary in the coal mine.

Now, I am not predicting that Bitcoin is going to zero. I still believe in its long-term potential. What I’m not saying is that Powell’s tariff threat is some kind of phantom menace – it’s a real risk and one that investors should be watchful of. But beware of the “Bitcoin is a safe haven” line. Do your own research. Understand the potential downsides. And get ready to position your portfolio to meet them.

As you can see, the market sentiment is on the side of “Greed.” Keep your guard up and don’t let that cloud your judgment. Greed can be blinding. Be smart. Be cautious. And don’t allow tariffs to destroy your Bitcoin paradise.

I'm not saying Bitcoin is going to zero. I still believe in its long-term potential. But I am saying that Powell's tariff threat is a serious risk that investors need to consider. Don't blindly follow the "Bitcoin is a safe haven" narrative. Do your own research. Understand the potential downsides. And be prepared to adjust your portfolio accordingly.

The market sentiment may be in "Greed" according to the Crypto Fear & Greed Index, but don't let that cloud your judgment. Greed can be blinding. Be smart. Be cautious. And don't let tariffs turn your Bitcoin dreams into a nightmare.