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In early 2026, U.S. President Trump issued a "Greenland Tariff" threat, triggering tensions in US-Europe trade relations, leading to a 3% single-day drop in Bitcoin prices on January 18th, and causing the total market capitalization of cryptocurrencies to evaporate by hundreds of billions of dollars. So, what short-term and long-term impacts will this tariff war have on Bitcoin prices? How does this tariff war differ from the US-China tariff war in 2025? How should we respond? Here, Little Wealth God will guide you through:

1. Short-term Impact: Risk Asset Attributes Dominate Market Reactions

1.1 Price Fluctuations and Market Sentiment Transmission

Bitcoin immediately dropped 3% after Trump announced the tariff threat, highlighting its risk asset nature. When global trade uncertainties increase, investors tend to sell off high-risk assets first, with Bitcoin becoming a preferred liquidation target due to its liquidity. This "risk contagion" mechanism was also evident during the US-China tariff escalation in April 2025, when Bitcoin experienced a 15% single-day decline.

1.2 Leverage Liquidations and Market Amplification Effects

The tariff news led to $790 million in long positions being liquidated within 24 hours. This leverage liquidation mechanism amplified price volatility, creating a negative feedback loop of "decline - liquidation - further decline." Data from February 2025 shows similar events caused $2.04 billion in liquidations, indicating the market's overreaction to geopolitical events.

1.3 Comparison with Other Assets

Unlike traditional safe-haven assets like gold, Bitcoin tends to decline initially during tariff wars. In the January 2026 event, gold prices hit record highs while Bitcoin fell, confirming its risk asset positioning. This difference stems from the structure of Bitcoin market participants: a high proportion of retail investors who overreact to short-term news.

2. Long-term Impact: Bitcoin’s Safe-Haven Attributes and Structural Changes

2.1 Safe-Haven Demand and Asset Allocation

Long-term tariff wars may strengthen Bitcoin’s narrative as "digital gold." Data from 2025 shows that 58% of fund managers preferred gold during the trade war, but Bitcoin’s allocation increased from 3% to 27%. This shift is driven by Bitcoin’s scarcity (max 21 million coins) and decentralization features.

2.2 Decentralization Advantages Highlighted

Tariff wars expose the policy dependence of traditional financial systems. Bitcoin’s blockchain technology offers an asset choice unaffected by government intervention. During the Mexican peso devaluation in 2025, local Bitcoin trading volume surged by 300%, demonstrating its potential as an alternative payment system.

2.3 Changes in Institutional Investor Behavior

Long-term tariff wars may accelerate institutional adoption of Bitcoin. Data from 2025 indicates that institutional investors view Bitcoin as an "alternative reserve asset." This structural change could alter Bitcoin’s price formation mechanism, gradually shifting it away from risk asset attributes.

3. Historical Comparison: 2025 vs. 2026 Events

3.1 2025 US-China Tariff War

Bitcoin decline: 15% (February 2025)

Liquidation scale: $2.04 billion

Market reaction: Panic selling dominated

3.2 2026 US-Europe Tariff Threat

Bitcoin decline: 3% (January 2026)

Liquidation scale: $790 million

Market reaction: Relatively rational, supported by institutional inflows

4. Response Strategies:

It can be observed that this trade war differs from the US-China trade war in 2025. Last time, the market experienced a short-term plunge followed by a slow rebound, with prices eventually "V-shaped" recovery. However, after this event, the price continued to decline over the next day, indicating extreme market weakness. In such a situation, blindly bottom-fishing or chasing shorts is not advisable. It is better to first close positions and observe, then act once the market clarifies.