4 things to know about bitcoin, tariffs and the stock market roller coaster

Like the traditional financial markets, cryptocurrencies like bitcoin have been on a roller coaster following President Donald Trump’s declaration of widespread tariffs last week.

Crypto, which largely held steady this year until Monday’s nosedive, was up again Wednesday after Trump's sudden reversal in American trade policy, suspending for 90 days import taxes he’d imposed barely 13 hours earlier on dozens of countries while escalating his trade war with China. 

While many cryptocurrency investors and enthusiasts had hoped crypto would serve as a hedge against global market forces, the crypto market is just as connected to global uncertainty as traditional markets, they said, adding that the recent declines were a temporary setback for a market that is primed to become widely adopted.

The price of bitcoin, the most popular cryptocurrency on the market, according to BankRate was down 3.43% to just over $79,700 in after-hours trading Thursday, following an increase of 8.82% the day before. The market gyrations follow a disappointing Monday when its price had fallen 6.93% from last Friday to just above $74,000, before rebounding to above $78,000 by end of day Monday.

Bitcoin had traded at more than $100,000 toward the end of January, according to Yahoo Finance.

“Bitcoin is still at around $80,000, which not too long ago was a dream,” Craig Rudes, a partner at Long Island Blockchain, a technical consulting firm for blockchain technology said Tuesday. Bitcoin prices peaked at $104,669 on Jan. 25.

Cryptocurrency is a digital currency secured by cryptography, safeguarding it against counterfeiting. Crypto is hosted on decentralized computer networks using blockchain technology, according to Investopedia. 

While there is currently no "defined regulation" used to regulate crypto in the United States yet, legislation introduced last year seeks to bring cohesive regulation to the landscape, according to Reuters. 

On Tuesday, The Associated Press reported that the Justice Department is disbanding a team of prosecutors who targeted cryptocurrency crimes and is shifting its focus away from complex crypto-related cases involving banking and securities law, according to a memo reviewed by The Associated Press.

However, some Long Island financial advisers such as Mitchell O. Goldberg, president of Melville-based financial advisory firm ClientFirst Strategy Inc., said Tuesday the value of crypto is not substantiated.

“It’s hocus pocus,” said Goldberg, who doesn’t advise on crypto investments for his clients. "I don’t think there’s anything that backs it up. It’s not a true asset.”

Here are four things to know about the cryptocurrency market amid broader market fears of a recession.

How is the crypto market tied to traditional markets?

“Typically, when we see a strong market pullback in the traditional finance world, crypto usually mirrors that,” Nick Selvaggio, partner at Long Island Blockchain said Tuesday. “If we see the S&P dropping like crazy, bitcoin tends to drop like crazy, as well.”

Selvaggio, however, said the impact of markets tends to be more exaggerated with crypto markets.

On Wednesday, Selvaggio said "we are seeing exactly" that phenomenon. "Ethereum is up almost 14%." It's price was down 8.74% Thursday.

“Whatever the Nasdaq does, or the S&P does, it does a magnified version of that,” Goldberg said.

What triggered price drops in crypto?

While the price of bitcoin has mirrored the U.S. stock market, there was a noticeable divergence between crypto prices and traditional markets last week, at least for a few days, Selvaggio said Tuesday.

After Trump on April 2 announced a 10% base tariffs on all imports to the United States, “the overall market pulled back and we saw ethereum and bitcoin holding steady,” he said. 

However, news of declines in Asian markets days later triggered price declines in bitcoin, as well as currencies such as ethereum, XRP and solana.

Why is crypto seen as a safe investment?

“The beautiful thing about cryptocurrencies is they are borderless,” Rudes said Tuesday. 

As a result, they can be free from national manipulation, he said.

“As turbulence continues, bitcoin will be looked at … as less risky,” Rudes said. "The fact that it’s a global trade currency means it has value.”

Financial advisers like Goldberg though caution against using crypto as a hedge against economic woes, or as a way to make up for lack of retirement savings.

What should owners or potential investors of cryptocurrency consider doing?

Selvaggio, who is not a financial adviser, said it’s important for those not already in the crypto market to understand that “it’s the riskiest asset class on the planet still.”