Impact of Fed Policy and Trade Tariffs on Bitcoin Price Predictions

Bitcoin prices have declined following President Trump’s trade tariffs, leading to speculation of an interest rate cut by the Federal Reserve to avoid recession. Heightened recession fears have prompted increased bets on future rate cuts, with predictions suggesting multiple reductions by October. Analysts like Arthur Hayes predict Bitcoin could soar to $250,000 by year-end if the Fed floods the market with dollars.

Bitcoin and cryptocurrency values have recently decreased following U.S. President Donald Trump’s implementation of significant trade tariffs, dubbed “Liberation Day,” leading to what some analysts describe as an “atomic bomb” impacting global markets. Following this announcement, Bitcoin experienced a decline after a period of growth, as traders attempted to adapt to the complexities of reciprocal tariffs and respond to emerging threats to the market.

BlackRock’s CEO has issued a warning that Bitcoin might challenge the U.S. dollar’s position as the world’s primary reserve currency. In light of this, traders are increasingly speculating that the Federal Reserve will need to lower interest rates to avert a potential recession in the United States. This action could result in the market being “flooded” with additional dollars, hence influencing Bitcoin’s price trajectory.

Short-term interest rate futures indicate a 70% likelihood of a Federal Reserve interest rate cut at their upcoming June meeting, an increase from 60% prior to the tariff announcements. Heightened recession concerns have led traders to amplify their expectations for rate reductions, with predictions suggesting three quarter-point cuts by October, as reported by Reuters.

Trump’s extensive trade tariffs have raised the probability of a recession in the U.S. to above 50% according to prediction markets like Polymarket and Kalshi. Joseph Wang, the owner of Fedguy.com, commented on social media that imposing tariffs is generally considered a dovish action, with large tariffs having an even more pronounced impact.

In September, a surprise 50 basis point interest rate cut by the Federal Reserve initiated a rally in Bitcoin prices, which continued through to Trump’s election in November. Arthur Hayes, co-founder of crypto derivatives platform BitMex, remains optimistic, asserting that Bitcoin could reach $250,000 by year-end due to expected dollar influx from the Federal Reserve’s policy shift towards quantitative easing.

Hayes posits that if his forecasts concerning the Fed’s change in policy are accurate, the previous low price of Bitcoin at $76,500 may have been a turning point, projecting an upward trajectory towards $250,000. He suggests that if given the choice, he would bet on Bitcoin reaching $110,000 before reverting to $76,500.