Bitcoin is entering one of its strongest months of the year, but rising concerns over global tariffs and inflation risks could dampen its performance.
According to CoinGlass, February has historically been a positive month for the leader BTC, closing in the green with an average return of 14% in all but two years since 2013. Having finished January with a 9% gain, investors are bracing for increased volatility due to changing macroeconomic conditions.
Market analysts are warning that recent geopolitical developments could overshadow Bitcoin’s seasonal strength. Antoni Trenchev, co-founder of cryptocurrency exchange Nexo, noted the impact of the sweeping tariffs that were implemented at the beginning of February. “A dark cloud in the form of sweeping tariffs has settled over Bitcoin and crypto, which risks its label as one of Bitcoin’s favorite months,” Trenchev said.
The uncertainty surrounding the tariffs has raised concerns among investors, with implications for both Bitcoin and major crypto firms like Coinbase. Oppenheimer’s Owen Lau noted that inflationary risks from the tariffs could weigh on the market in the coming weeks. “This could turn into a protracted trade war and raise concerns about an economic downturn,” Lau said. “It doesn’t look like it’s going to be resolved in February, so the sector is likely to remain under pressure throughout the month.”
Over the weekend, Bitcoin fell sharply after former President Donald Trump signed an executive order imposing 25% tariffs on imports from Mexico and Canada, and 10% on goods from China. However, the market partially recovered after the US agreed to halt tariffs on Mexico and Canada. Despite the recovery, Trenchev warned that volatility remains a major concern. “Further declines cannot be ruled out in this uncertain geopolitical environment, and we cannot say that Bitcoin has lifted the smokescreen until it breaks $110,000,” he added.
The Fed’s cautious stance on monetary policy is adding further uncertainty. With six weeks to go until the next Federal Open Market Committee (FOMC) meeting, investors are closely analyzing economic data for clues about potential rate adjustments. “A quiet Fed is another reason to be cautious,” Trenchev said.
Despite these macroeconomic concerns, the crypto industry is seeing some positive regulatory developments. In January, former Securities and Exchange Commission (SEC) Chairman Gary Gensler resigned, and Commissioner Mark Uyeda took over as interim chairman until Paul Atkins was confirmed. Uyeda, an advocate for the crypto industry, will lead a task force to create clear regulatory guidelines.
In addition, the SEC repealed the controversial SAB 121 accounting rule, which required financial institutions to treat cryptocurrencies as liabilities on their balance sheets. Trump also signed an executive order that outlines a framework for the crypto industry to continue operating in the US.
Trump recently signed another executive order outlining plans for a sovereign wealth fund, prompting speculation that the fund could house seized crypto assets. Meanwhile, Tennessee Republican Sen. Bill Hagerty has proposed new stablecoin regulations that add further momentum to the evolving regulatory landscape. Later today, crypto and AI chief David Sacks is expected to announce additional crypto-related initiatives during a scheduled press conference.
Zach Pandl, Grayscale’s director of research, acknowledged that while some industry participants were disappointed by Trump’s crypto executive order, particularly its focus on planning rather than implementing the Strategic Bitcoin Reserve, it still provided important clarity. “The order provided the industry with all the clarity it needed to be confident that the Trump administration would support crypto development in the U.S.,” Pandl said.
While Bitcoin’s long-term outlook remains promising, market conditions could remain challenging in the near term, Pandl suggested that the market has yet to fully price in the effects of the executive order. “In February, I expect the long-term effects of Trump’s executive order to be understood by crypto investors, potentially attracting new capital into the asset,” Pandl said.
However, broader economic concerns could weigh on investor sentiment. Uncertainty over higher tariffs and AI valuations could weigh on both equity and crypto markets. “Investors are likely to reduce risk across the board, including in crypto,” Pandl warned.
Despite these challenges, Bitcoin’s status as a global asset could help shield it from the direct impacts of U.S. tariffs. “The widespread use of tariffs could further fragment the dollar-based global financial system and likely drive trading partners to seek alternative currencies and payment systems,” Pandl added, suggesting that Bitcoin could eventually benefit from a shift away from traditional financial structures.
*This is not investment advice.
