Crypto Recovers as Trump Retreats on Tariff Threats: Market Eyes Treasury Demand and Macro Hedges

Source: CryptoNewsNet Original Title: Crypto edges higher as Trump retreats on Greenland-linked tariff threats Original Link:

Market Recovery on Policy Retreat

Crypto markets found their mojo after President Trump appeared to hit pause on his tariff threats against eight European nations—this time over Greenland—sending top digital assets modestly into the green.

The episode has revived traders’ favorite acronym, TACO (“Trump Always Chickens Out”), shorthand for the belief that Trump’s toughest talk is often more leverage than law.

Key Developments

• Trump reiterated his goal of making the US the crypto capital of the world by implementing policies friendly to the industry, citing the GENIUS Act focused on stablecoins and the CLARITY Act
• He stated the U.S. will rely on diplomatic channels to address Greenland and ruled out military options
• Trump said he “won’t use force” and is not planning to impose threatened tariffs on regional countries on February 1

Bitcoin (BTC) price rose to $90,232 while Ethereum rose by over 1.3% in the last 24 hours to $3,036.

Initial Market Dip and Liquidations

The crypto market initially dipped after Trump’s speech, with the Crypto Fear and Greed Index falling to the fear zone of 32 from this month’s high of 60. Cryptocurrency prices often retreat when market sentiment turns fearful.

The crypto market also took a downturn due to a stalled CLARITY Act. Liquidations in the crypto industry contributed to the ongoing market volatility, with data showing liquidations rose by 17% in the last 24 hours:

• Bitcoin’s bullish liquidations: $345 million
• Ethereum liquidations: $277 million
• Other significant liquidations in XRP, HYPE, and DOGE

Crypto liquidations occur when exchanges close leveraged positions as losses mount and approach the margin level.

Treasury Demand and Bitcoin’s Hedge Role

The U.S. finances itself through Treasury debt auctions, where global demand determines interest rates. When confidence wavers, buyers demand higher yields to compensate for risk. If bids weaken, yields can spike sharply, signaling that U.S. debt is becoming less attractive.

Large foreign holders like Japan and Canada wield outsized influence: if they were to sell Treasuries or stop rolling over maturing debt, yields would surge dramatically, borrowing costs would jump, and financial markets could face stress. Recent examples include Swedish pension giant Alecta selling most of its U.S. Treasury holdings, citing increased risk and unpredictability.

Bitcoin as a Macroeconomic Hedge

If foreign demand for U.S. Treasuries weakens, yields rise as a stress signal, which historically supports Bitcoin’s role as a hedge against sovereign risk rather than as a risk asset.

Public doubts from pension funds about U.S. policy or fiscal stability reinforce crypto’s appeal as a non-sovereign store of value. Any marginal shift toward alternatives like gold or inflation hedges can be meaningful for digital assets given their smaller market size. A softer dollar tied to weaker Treasury demand would further support Bitcoin and, to a lesser extent, Ethereum.