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President Donald Trump‘s tax reduction plans, paired with his aggressive tariff policies, have significantly disrupted the cryptocurrency market, prompting heightened volatility and an ETF-driven sell-off in Bitcoin (CRYPTO: BTC) over the past weeks.
Trump’s proposal to eliminate income tax for individuals earning less than $150,000—potentially affecting 93% of Americans—aims to boost disposable income, but his simultaneous tariff hikes, including a 20% universal rate and 60% on Chinese imports, have sparked inflation fears, impacting risk assets like cryptocurrencies.
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The interplay of these policies, alongside the Strategic Bitcoin Reserve, has created a complex landscape for crypto investors.
Trump’s tax strategy includes making the 2017 Tax Cuts and Jobs Act (TCJA) permanent, which lowered the top income tax rate from 39.6% to 37%, and now extends to exempting incomes below $150,000, as well as tips, overtime pay and Social Security benefits, per Tax Foundation data.
Commerce Secretary Howard Lutnick, in a CBS News interview on March 12, emphasized that these measures “generate revenue and drive growth,” potentially freeing up funds for Americans to invest in assets like Bitcoin.
But the revenue shortfall, estimated at $4.9 trillion over a decade by the Penn Wharton Budget Model, is meant to be offset by tariffs, which could raise $3.3 trillion but may also shrink GDP and fuel inflation, as warned by the Peterson Institute for International Economics.
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The crypto market has felt immediate effects: Bitcoin dropped from $105,000 to $92,000 (-12.38%) after the Feb. 1 tariff threat and rebounded to $100,000 (+8.7%) on Feb. 3 with a Mexico tariff pause.
It fell from $94,834 to $86,500 (-8.79%) on the March 3 tariff confirmation, hit $78,225 (-14.45%) by the March 5 post-implementation, and dumped 5% from $89,200 to $84,600 after the March 7 Bitcoin Reserve signing.
