Bitwise: Why the tariff war caused a sharp correction in BTC to be a buying opportunity

Author: Matt Hougan, Chief Investment Officer of Bitwise; Compiler: 0xjs@黄金财经

One of the most frustrating things about owning Bitcoin is that it doesn't perform as you would like in times of crisis.

People buy Bitcoin as a hedge asset, but when the market is turbulent, Bitcoin tends to pull back in the short term.

The last time we saw this was last week, when growing concerns about tariffs triggered a sell-off in the stock market and Bitcoin.

My colleague Juan Leon wrote an authoritative article on this. Juan looked at all the times in the past decade when the S&P 500 fell more than 2% in a day. He pointed out that, on average, Bitcoin actually fell more than the S&P 500 during these pullbacks - falling by about 2.6%.

Ah.

But Juan’s research shows something else: If you stay invested — or buy more after a pullback — you’re well on your way. On average, Bitcoin is up a staggering 190% in the year following these big pullbacks, far outperforming all other assets.

I call this pattern “Dip Then Rip,” and historically, it’s one of the most consistent in crypto.

In this week’s memo, I want to explain why this happens.

How Wall Street Values ​​Assets

Basically, all of Wall Street revolves around the idea of ​​“net present value.”

As investors know, “net present value” is a calculation of how much an asset is worth today based on your estimate of how well it will perform in the future.

Of course, the most common application is discounted cashflow analysis (DCA): If you have a company that you think will earn $1 a year for the next 20 years, how much is it worth today?

Obviously it's not worth $20; why would you give up $20 today just to get $20 back in 20 years? Instead, you can calculate its value today by "discounting" its future cash flows.

When doing DCA, the big question is how much you should discount those cash flows. Typically, analysts take the "risk-free rate" (i.e., the current rate on short-term U.S. Treasury bills) and then increase it based on the level of uncertainty in the stock and the market. For example, today's risk-free rate is 4.37%. If the company is very safe, you might round it up and apply a 5% discount rate. If it's riskier, you might apply a 10% or 20% or higher discount rate.

Because the math adds up over time, a small change in the discount factor can have a huge impact on today's estimate (the net present value). Using our $20 example, if you discount those cash flows at a 5% annual rate, the company is worth $12.46 today. If you discount those cash flows at a 10% rate, the company is worth only $8.51.

The greater the risk, the greater the discount — and the lower the price today.

How does this apply to Bitcoin?

Bitcoin has no cash flows, but in my opinion, the same idea applies.

For example, at Bitwise, we think Bitcoin will be worth $1 million in 2029. So, you might ask, what do we think it's worth today?

That depends on the discount rate, which is the risk you assign. If you discount it at a 50% annual rate, the net present value is $218,604. If you use a 75% discount rate, the net present value is $122,633.

Note that there are two factors that influence the NPV of Bitcoin: 1) an estimate of its long-term value (e.g. $1 million by 2029), and 2) a discount factor.

Understanding Why Tariff Wars Triggered BTC Pullbacks

Now let’s use this framework to understand the market’s reaction to a tariff-driven pullback.

News that spark economic uncertainty has a two-way impact on Bitcoin. Check out what NYDIG (one of the smartest firms in crypto) said when writing about the recent tariff-related sell-off:

“What does Bitcoin have to do with tariff wars? Nothing, except that it is a liquid, globally available, and traded 24/7 asset. If anything, Bitcoin will benefit from rising global entropy and political and economic chaos caused by governments.”

Note that they are saying two things here:

• In the short term, tariffs are challenging for Bitcoin and other liquid assets because they inject uncertainty into the market. In other words, they increase the discount factor, the perceived “risk” of the asset.

• In the long run, tariffs are good for Bitcoin because Bitcoin acts as a hedge against political and economic disruption. In other words, they raise Bitcoin’s long-term price target.

Let’s put it back into discount mode and think about the math.

You might imagine that tariffs increase our long-term price target for Bitcoin from $1 million to $1.1 million by creating economic entropy. At the same time, they increase the discount factor we use to calculate Bitcoin’s net present value from 75% to 85%. Mathematically, this would cause Bitcoin’s “net present value” to drop from $122,633 to $109,521 — despite a 10% increase in our 2029 price target.

So, even though we are more bullish on Bitcoin than ever, our short-term price target has dropped. This explains the pullback. But if the market stabilizes, the world doesn’t end, and the discount factor falls back from 85% to 75%, Bitcoin will recover from the pullback and even rally.

Dip then rip.

Why I think this framework is useful

To be clear: I’m not saying that everyone in the market is making these calculations. Rather, I’m saying that the invisible hand of the market is making these calculations, groping for new price targets.

For long-term investors, this is important to understand because it helps you focus on the ultimate goal: long-term returns.

If you’re a long-term investor, short-term spikes in the discount factor are opportunities to get in on the dip.

From my perspective, I’ve never been more optimistic.