Will Bitcoin Go Up If Donald Trump Eliminates Income Tax For Americans Making Less Than $150,000?

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 BTC/USD over the past weeks.

Donald Trump’s Tax Plans…

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.

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.

Also Read: Bitcoin ETFs See Record $5.5 Billion In Outflows In 5 Weeks As Tariff Turbulence Looms

…And What They Mean For Crypto

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.

By March 17, Bitcoin had slid from $109,000 to $85,000 (-13.68%) amid ongoing tariff impacts.

U.S. Bitcoin ETFs saw record outflows of $5.5 billion over five weeks, reflecting investor caution amid trade war fears, according to Bloomberg.

Greg Magadini, director of derivatives at Amberdata, noted, "Bitcoin and crypto overall remain driven by the macro picture right now. I don't expect Bitcoin to diverge from risk-assets for the time being."

The Role Of The Strategic Bitcoin Reserve

Meanwhile, Trump's Strategic Bitcoin Reserve, established on March 6 with 200,000 BTC worth $17 billion from seized assets, has bolstered Bitcoin's legitimacy, potentially supporting prices long-term, as reported by Reuters.

Despite this, the tariff-driven economic uncertainty has overshadowed the reserve's positive signal, with inflation risks making Bitcoin a potential hedge but also causing short-term volatility.

"Tariffs could lead to inflation, making Bitcoin attractive as a hedge, but initial market reactions show volatility," according to an ABC News analysis.

The broader crypto market, including assets like Ethereum ETH/USD and Solana SOL/USD in the U.S. Digital Asset Stockpile, may also see increased interest if economic instability persists, though trade wars could dampen overall investor sentiment, as highlighted by the Stanford Institute for Economic Policy Research.

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