Trump's tariffs severely impact Bitcoin! BTC is caught in a battle to defend the $100,000 mark, can TACO trading save the market?

Trump's tariffs and Bitcoin traders avoiding long positions with leverage have caused the BTC price to fall to new lows. Since Bitcoin fell to $107,000 on the exchange on October 10, the market has been trying to regain balance, but Trump's tariffs have suppressed bullish sentiment. The liquidation heat map suggests that prices may chase long liquidations between $106,300 and $104,000, and TACO trades may become a focal point in the market.

Trump's tariff war escalates, severely impacting Bitcoin market confidence

The deterioration of Sino-American relations, the recent expansion of Trump tariffs by US President Trump, and traders' avoidance of using long positions have all increased the downward pressure on Bitcoin. The uncertainty of Trump’s tariff policy is having a systemic impact on risk assets, with Bitcoin being particularly affected as a high volatility asset. As global trade frictions intensify, investors tend to withdraw from risk assets and turn to traditional safe-haven tools, a pattern that has been validated in previous tariff disputes.

Bitcoin may fall below $100,000, but analysts hope that next week's macroeconomic events can reverse the downward trend. The core issue of Trump's tariff policy is its unpredictability, making it difficult for the market to price in this policy risk ahead of time. When Trump suddenly announced a 100% tariff on Chinese imports, the cryptocurrency market evaporated hundreds of billions of dollars in market value within hours, and this extreme volatility poses significant liquidation risks for leveraged traders.

The record shutdown time of the U.S. government has further exacerbated uncertainty. A government shutdown means delays in the release of economic data and stagnation of regulatory decisions, and this policy vacuum often comes with increased market volatility. For assets like Bitcoin that are traded 24/7, the impact of policy uncertainty is magnified, as the market cannot obtain clear policy guidance during the government shutdown.

The mechanism of Trump's tariffs on Bitcoin is multi-layered. First, tariffs raise inflation expectations, and the Federal Reserve may be forced to maintain high interest rates, which puts valuation pressure on Bitcoin, which does not generate cash flow. Second, concerns about an economic recession triggered by tariffs lead to a decrease in risk appetite, causing investors to reduce their allocation to speculative assets. Third, the deterioration of China-U.S. relations may affect the cross-border liquidity of cryptocurrencies, especially the international settlement of stablecoins.

The split market between spot buying and futures selling

(Source: SoSoValue)

Since Bitcoin fell to $107,000 on the exchange on October 10, the inflow of spot Bitcoin ETF, CEX premium index, and the cumulative trading volume increase of spot transactions for professional and retail investors on the exchange (the net difference between market buys and sells) have been steadily rising. This phenomenon indicates that institutional and retail investors in the U.S. market are buying the dip, viewing the decline triggered by Trump’s tariffs as a building opportunity rather than a trend reversal.

(Source: Trading View)

Since the sell-off on October 10, the trading volume increase, capital flow, and open interest dynamics in the Bitcoin market have changed. Retail and institutional investors in the United States are clearly increasing their holdings of BTC, while Binance perpetual contract traders have been actively selling off. This split between the spot and futures markets shows a key fact: long-term investors are hoarding coins, while short-term traders are shorting.

(Source: Trading View)

Comparing the spot trading volume of Binance with its futures trading volume, the spot delta is positive, while the perpetual contract delta is negative, highlighting the rise of short positions, confirming the view that the sell-off driven by perpetual contracts is strengthening the downtrend, while the demand from spot buyers provides support between $107,000 and $108,000. This structural divergence is not uncommon in Bitcoin's history and typically occurs during market bottoming phases.

Key Differences Between Spot and Futures Markets:

Holding Period: Spot buyers typically plan to hold long-term, while futures traders pursue short-term price differences.

Leverage Usage: The futures market has high leverage that amplifies volatility, while the spot market carries no leverage risk.

Clearing Risk: Futures short positions face forced liquidation when prices rebound, while spot holders do not have this risk.

The duration of this fragmented market structure will determine the short-term direction of Bitcoin. If the spot buying remains strong, it will eventually absorb the selling pressure from the futures market, driving prices up. However, if Trump's tariff policy further deteriorates and undermines the confidence of spot buyers, the market may enter a deeper correction.

Liquidation Heatmap Reveals $104,000 Key Battleground

(Source: Hyblock)

Considering the potential price trend of Bitcoin in the short term, the liquidation heatmap outlook suggests that momentum traders may chase long positions liquidation clusters between $106,300 and $104,000, while short positions face liquidation risk at $115,000. The liquidation heatmap is an important tool for understanding the behavior of leveraged traders, showing the density of accumulated liquidation orders at different price levels.

The long positions liquidation cluster between $106,300 and $104,000 indicates that a large number of leveraged longs have their forced liquidation prices concentrated within this range. When the price falls into this range, it will trigger a chain liquidation, and the concentrated selling pressure could lead to a rapid price decline. This “stop loss hunting” behavior is extremely common in the cryptocurrency market, where large traders and market makers intentionally push the price towards the liquidation concentration area to profit.

The short liquidation risk of 115,000 USD provides a contrary perspective. If the price of Bitcoin unexpectedly rebounds and breaks through this level, a large number of shorts will be forced to cover their positions, resulting in a “short squeeze,” driving the price further up. This mechanism explains why Bitcoin often experiences a V-shaped reversal during extreme pessimism.

Although prices are expected to remain volatile in the short term, Quinn Thompson, Chief Investment Officer of Lekker Capital, stated: “The liquidation ratio of 10/10 is higher than the leverage ratio for the entire period from January to April 2025 (calculated in dollars and position percentages). Future opportunities are similar to the situation before Trump's victory in 2024.” This observation is extremely important as it suggests that the current liquidation event has fully released excessive leverage, and the market is preparing for the next wave of pump.

Can TACO trading strategy turn the situation around?

TACO trading (Trump Always Chickens Out) refers to the tendency of Trump's tariff policies to reverse after being announced, which may become crucial amid the market turbulence triggered by the current Trump tariffs. This strategy focuses on predicting the impact of U.S. policy changes on asset prices and holds special value in a highly uncertain macro environment.

The macroeconomic-focused account Tom Capital reminds traders to “just trade price action,” as a large number of actionable events are expected to occur next week. The deeper implication of this advice is that, in the unpredictable context of Trump’s tariff policies, it is better to focus on the market's actual reactions rather than trying to predict the direction of policies. The core of TACO trading is to observe the actual operations of the U.S. government, rather than guessing its intentions.

Next week's macroeconomic events may include speeches from Federal Reserve officials, the release of economic data, or further statements on Trump's tariff policy. These events will provide specific trading opportunities for TACO. If the Federal Reserve releases dovish signals or if there are signs of easing in Trump's tariff policy, it could trigger a strong rebound in risk assets, with Bitcoin benefiting the most as a high beta asset.

The application of TACO trading in the Bitcoin market requires a high level of discipline. Traders should set clear entry and exit conditions to avoid excessive exposure to risk during times of unclear policies. The current market structure shows that $107,000 to $108,000 is a strong support area for spot buyers, while $106,300 to $104,000 is a concentration area for long positions liquidation. A rational TACO trading strategy may involve building small positions in the support area and waiting for macro catalysts to confirm before adding to positions.