TACO trading profits double again! Trump temporarily delays European tariffs, Bitcoin follows the decline but doesn't rise.

Sweden’s largest pension fund Alecta liquidates approximately $8 billion in U.S. Treasuries after clearing out holdings worth $8 billion. Following Europe’s threat to unleash a financial nuclear strike, Denmark’s pension fund Akademiker Pension sold only $100 million. Subsequently, Sweden’s largest pension fund Alecta took it seriously and sold about $8 billion in U.S. Treasuries, essentially fully unwinding their position. Such a scale of selling has caused tangible impacts on the U.S. bond market, with the 10-year Treasury yield beginning to rise, indicating bond prices are under pressure.

Perhaps fearing a chain reaction in Europe, Trump just backed down, stating he will not use force to seize Greenland and has canceled EU tariffs. Trump posted on Truth Social: “Based on my meeting with NATO Secretary General Mark Rutte, we have reached a ‘framework of a future deal’ regarding Greenland and the entire Arctic region,” thus postponing the originally planned tariffs on eight European countries (Denmark, Norway, Sweden, Finland, Germany, France, Netherlands) scheduled for February 1.

This directly halted the tariff crisis triggered by the Greenland dispute, and stock markets quickly rebounded, with the major U.S. indices soaring. The TACO trading strategy was once again validated, allowing bottom-fishing investors to realize substantial gains within just a few hours. This event perfectly reproduces the classic TACO pattern—threatening and then retreating within a cycle of less than 48 hours.

However, the damage extends beyond asset prices to the sentiments of the Danish people. The framework of this agreement appears to have been negotiated directly between Trump and NATO Secretary General Rutte, seemingly without prior knowledge or involvement from Denmark, which is seen as “bypassing Denmark in direct talks,” further hurting Danish public sentiment and trust in the U.S… Many European officials privately expressed that while the cancellation of tariffs eased tensions, Trump’s unpredictability has caused lasting geopolitical rifts and doubts among allies.

Complete Analysis of the TACO Trading Pattern

TACO stands for “Trump Always Chickens Out,” a nickname from Wall Street mocking Trump’s trade strategies during his second term. Over the past nine months, the reliable TACO trading pattern has been popular on Wall Street. It originated from Trump’s April last year, when he made bold moves on global tariffs and then withdrew them, leading investors to ignore the White House’s most extreme threats and continue buying risk assets.

Four Steps of the TACO Trading Pattern

Trump makes bold threats: High-profile threats of tariffs or aggressive trade measures

Market panic: Stocks and cryptocurrencies plummet, risk assets are sold off

Trump retreats: Claims a “framework” or “understanding” has been reached, threats are paused or canceled

Assets rebound: Prices quickly recover, bottom-fishers take profits on the rebound

Investors have thus invented the TACO trade: buy stocks or cryptocurrencies at lows during tariff panic, then sell at highs after Trump “retreats” to profit from the rebound. It has become one of the hottest “Trump trading” strategies in 2025-2026. The Greenland tariff incident is a classic example—many are shouting “TACO is back,” and assets bought at the bottom have skyrocketed.

From a psychological perspective, TACO trading exploits market overreactions. When Trump issues extreme threats, markets tend to price in the worst-case scenario, causing asset prices to overreact downward. Experienced investors have learned to recognize this pattern, knowing Trump’s threats are often negotiation tactics rather than genuine intentions, so they step in to buy the dip during panic.

Bitcoin as the Only Loser in TACO Trading

Unfortunately, Bitcoin still trailed behind and did not rally along with the others. During the tariff threats, BTC briefly fell below $88,000. After Trump announced the cancellation, it temporarily surged above $90,000 but quickly retreated. Currently, it remains oscillating between $88,000 and $90,000. This performance starkly contrasts with the strong rebound of U.S. stocks, with the Dow Jones Industrial, S&P 500, and Nasdaq Composite all soaring, led by tech and financial stocks.

Why did Bitcoin lag? Major trader Wintermute warned that this weak performance might be a sign that Bitcoin is “going cold.” Technically, Bitcoin failed to break through the $90,000 resistance despite positive news, indicating insufficient buying momentum. From capital flow perspective, during the stock market rebound, funds prioritized equities over crypto, showing risk appetite is recovering but confidence in crypto remains limited.

This divergence reveals a key market feature: Bitcoin is no longer purely a risk asset, but it has not yet fully established itself as a safe haven. During Trump’s tariff threats, Bitcoin declined along with stocks, proving it is still viewed as a risk asset. But after Trump retreated, Bitcoin failed to rebound as strongly as stocks, indicating it lacks the resilience of traditional risk assets. This “stuck in the middle” position may be Bitcoin’s biggest current challenge.

From a TACO trading perspective, Bitcoin is no longer an ideal target. Traditional TACO traders buy beaten-down stocks like tech or export-oriented companies during tariff panic, assets that often rebound 5-10% after Trump retreats. But Bitcoin’s rebound strength is clearly insufficient, making the risk-reward ratio unfavorable.

Risks and Future Evolution of TACO Trading

Although TACO trading has proven effective over the past nine months, it carries risks. The biggest is the “boy who cried wolf” effect—if Trump actually executes a threat without retreating, TACO traders could suffer significant losses. Additionally, as more investors adopt this strategy, market overreactions may diminish because widespread panic buying reduces asset declines.

Looking at the Greenland incident, Trump’s retreat was faster than usual. It took less than 48 hours from threat to cancellation, possibly indicating Trump’s team has realized that markets are becoming more immune to trade threats. To maintain leverage in negotiations, Trump might need to occasionally carry out real threats; otherwise, markets may completely ignore his words.