Crypto Markets Rebound as Trump Pauses Tariffs and Signs Sovereign Wealth Fund Order

The cryptocurrency market saw a sharp recovery following U.S. President Donald Trump's decision to temporarily halt proposed tariffs on Canada and Mexico.

The move comes as negotiations between the countries continue, easing concerns over potential economic disruptions.

Tariff Pause and Border Security Measures

In a statement on Feb. 3, Canadian Prime Minister Justin Trudeau announced that after a phone call with Trump, the 25% tariffs on Canadian imports would be paused for at least 30 days. In exchange, Canada agreed to strengthen security measures, including a $1.3 billion border plan, appointing a fentanyl czar, and listing certain cartels as terrorist organizations.

Similarly, Mexico's tariffs have also been postponed for a month. President Claudia Sheinbaum confirmed that both nations had reached an agreement to reinforce border security and enhance trade cooperation. However, in a Bloomberg TV interview, Trump clarified that while the tariffs are on hold, they have not been entirely dismissed.

Meanwhile, tariffs on Chinese imports remain unchanged. Reports indicate that China is open to negotiations, with early discussions hinting at the potential revival of the 2020 Phase 1 trade deal, which required Beijing to increase U.S. imports by $200 billion over two years.

Crypto Markets React to Policy Shifts

Following the tariff suspension, Bitcoin (BTC) surged past the $100,000 mark, recovering from a low of $92,000 recorded the day before, according to CoinMarketCap.

Ether (ETH) also rebounded, climbing to $2,880 after briefly dropping to $2,451. The Crypto Fear & Greed Index moved into "greed" territory with a score of 72, reflecting renewed investor confidence.

Betting markets on Polymarket indicate a 24% probability that Trump will fully remove tariffs on Mexico before March, a 22% chance for Canada, and only a 9% likelihood for China.

Trump Orders Creation of Sovereign Wealth Fund

In another significant move, Trump signed an executive order directing the U.S. government to explore the creation of a sovereign wealth fund. Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick will oversee the process, with implementation expected within the next 12 months. The order aims to monetize U.S. assets, though details remain unclear on whether cryptocurrencies like Bitcoin would be included.

While the executive order does not explicitly mention digital assets, some lawmakers and industry advocates believe it could pave the way for government involvement in Bitcoin holdings.

Wyoming Senator Cynthia Lummis hinted at the possibility of using the fund to acquire BTC, aligning with Trump’s previous campaign promises, including establishing a U.S.-based Bitcoin reserve and halting the development of a central bank digital currency (CBDC).

Financial Leadership Changes and Regulatory Outlook

Trump’s administration continues to reshape U.S. financial leadership. Treasury Secretary Scott Bessent, confirmed just a week ago, has also been appointed acting director of the Consumer Financial Protection Bureau (CFPB) following the removal of Rohit Chopra. The CFPB is currently facing a lawsuit from tech industry groups over its proposed regulation of payment apps, which largely excludes crypto wallets.

Additionally, the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) are undergoing leadership transitions, with Trump’s nominees awaiting Senate confirmation. His administration has also issued an order suspending new regulations across agencies, potentially impacting future financial oversight.

The combination of policy shifts has led to renewed optimism in crypto markets. Investors are closely watching further developments on tariffs, regulatory changes, and the potential sovereign wealth fund, as each could significantly impact market dynamics in the coming months.