Should Investors Stay Away From Crypto as the Tariff War Heats Up? 

In the 48 hours before new tariffs on Canada and Mexico were scheduled to go into effect, there was a huge sell-off in just about every single cryptocurrency, including market leader Bitcoin (BTC 0.73%). At one point, Ethereum (ETH 0.29%) was down as much as 25%. More speculative cryptos, such as meme coins, were hit especially hard.While many cryptos subsequently recovered after the implementation of the tariffs was put on hold, those 48 hours offer a cautionary tale for anyone thinking about investing in crypto as the tariff war heats up. To be successful, investors will need a much finer understanding of where cryptocurrency projects are based, and how much support they have from the Trump White House.BitcoinOne crypto that absorbed less of a hit than other cryptocurrencies was Bitcoin. While Ethereum fell by 25%, Bitcoin retreated by only 7%. Just when it looked like Bitcoin might dip below $90,000, it quickly recovered and now trades near the $100,000 mark.There is one key reason for Bitcoin’s resiliency. Many investors perceive Bitcoin as a hedge against inflation, similar to gold. In fact, in many investment circles, Bitcoin is referred to as digital gold. Thus, if proposed tariffs on Canada, Mexico, and China do lead to higher prices and spiraling inflation for consumers, Bitcoin is one asset that might provide some protection.Even before the tariffs go into effect (some have already gone into place in the case of China), some high-profile investors thought this might be the case. For example, billionaire Mark Cuban suggested that it might be time to buy Bitcoin back in January. He was fully pricing in the prospect of inflation from the Trump tariffs, and thought that Bitcoin might provide refuge from the storm.Keep in mind, too, that Bitcoin has historically been uncorrelated with other major asset classes. In other words, Bitcoin can zig when other assets zag. That’s good news if you are expecting an economic downturn as a result of tariffs. Stocks might fall, but Bitcoin may not. Thus, even in a worst-case economic scenario, Bitcoin might provide valuable diversification benefits.Made-in-America cryptosIn addition, made-in-America cryptos could be another investment opportunity to explore if a tariff war expands in scope and size. That’s because President Donald Trump ran on a “Make America Great Again” (MAGA) platform, and has repeatedly pledged to make America the crypto capital of the world. So keep a close eye on which cryptocurrencies appear to have the support of the Trump White House.Image source: Getty Images.Although cryptocurrencies are by their very nature global and decentralized, it’s worth taking a closer look at the specific cryptos held by World Liberty Financial, which is a Trump-affiliated crypto company. Ahead of Trump’s inauguration, this company purchased more than $100 million in crypto, and its holdings continue to grow.Currently, two of the largest holdings of World Liberty Financial are Ethereum and Chainlink.