Geopolitical "TACO Trading" and the Cryptocurrency Market: A New Asset Logic Amid Global Risk Aversion

Trump's tariff threats caused global stock markets to hit limit down multiple times, but the market quickly reached a consensus to buy on dips. A policy reversal-centered "TACO trading" is becoming the new game rule that global investors must master.

Disputes between Greenland and Denmark have once again caused turbulence in global markets. On January 17, 2026, the Trump administration suddenly threatened to impose tariffs of up to 25% on eight European countries, citing their "non-cooperation" on Greenland issues.

This marks the latest escalation in US-Europe trade frictions since 2025. The tariff threats involve not only goods circulation but are also closely intertwined with geopolitical considerations.

Market reactions were swift and predictable. In April 2025, when Trump announced global reciprocal tariffs, A-shares experienced limit-down days, with the Shanghai Composite Index dropping 7.34% in a single day, plunging global stock markets into panic. This time, investors seem better prepared psychologically.

Surprisingly, Wall Street analysts remain skeptical about the seriousness of this threat. JPMorgan explicitly stated in a report: "Trump's Greenland threat should be interpreted as a negotiation strategy."

01 The New Geopolitical Variable

Greenland is becoming an unexpected trigger point for the global markets. On January 17, 2026, the Trump administration suddenly threatened to increase tariffs from 10% to 25% on Denmark and seven other European countries, citing their "non-cooperation" on Greenland issues.

This is the latest escalation in US-European trade frictions since 2025. The tariff threats involve not only commodity flows but are also deeply intertwined with geopolitics.

Market responses were rapid and predictable. In April 2025, when Trump announced global tariffs, Chinese stocks and steel prices rebounded, reflecting cyclical shifts in market sentiment.

Regarding the foreign exchange market, analysts believe Trump's tariff threats have reignited the "sell dollar" sentiment. This uncertainty directly undermines investor confidence in the USD.

The euro faces even greater challenges. As geopolitical risks continue to ferment, tariff measures could further drag down the Eurozone economy and weaken Europe's bargaining chips with Russia over Ukraine.

By 2026, as geopolitical risks escalate during Trump's term, the euro may become the biggest loser among major currencies. This judgment is based on analyses suggesting tariffs could exacerbate adverse economic cycles in the Eurozone.

02 The Essence of TACO Trading

TACO trading, short for "Trump Always Chickens Out," has become a special trading strategy on Wall Street to respond to Trump's tariff policies.

The core logic of this strategy is based on Trump's policy style: he first creates noise, leverage, and urgency, presenting the worst-case scenario initially.

Since 2018, the market has witnessed multiple cycles of this pattern. When Trump announced high tariffs, markets declined; then policies were softened or delayed, leading to rapid rebounds. This pattern was especially evident in 2025, becoming a key logic behind asset price movements.

In response to the current Greenland tariff threats, Wall Street is weighing three possible scenarios:

- The highest probability (about 55%) is that the US and Denmark will reach an agreement, with the US gaining greater access to Greenland's natural resources as a solution.

- About 40% chance that Trump will withdraw the tariff threats before the midterm elections, due to political pressure.

- The likelihood that the US Supreme Court will rule Trump's tariffs illegal has increased from 30% to 50%, as the legal basis for the tariffs faces constitutional review.

03 Transmission to Traditional Markets

The logic of TACO trading has profoundly influenced traditional asset prices. In the second half of 2025, after TACO trading became the new market logic, Chinese stocks and steel prices rebounded, reflecting cyclical shifts in market sentiment.

For the forex market, analysts believe Trump's tariff threats have reignited the "sell USD" sentiment. This uncertainty directly shakes investor confidence in the dollar.

The euro faces even more severe challenges. As geopolitical risks continue to ferment, tariff measures could further dampen the Eurozone's economic cycle and weaken Europe's bargaining power with Russia over Ukraine.

In 2026, with escalating geopolitical risks during Trump's tenure, the euro may become the biggest loser among major currencies. This judgment is based on analyses suggesting tariffs could intensify adverse economic cycles in the Eurozone.

04 Linkages in the Cryptocurrency Market

The crypto market is seeking its own positioning amid global geopolitical turmoil. A clear logical chain is forming: a weakening dollar tends to boost dollar-denominated crypto assets, while pressure on the euro may divert some European risk capital into cryptocurrencies.

Trump himself has become an influential factor in the crypto market. He not only supports the "BITCOIN Act," promising to buy 1 million BTC over five years, but his Trump Media Group also announced a $2.5 billion Bitcoin reserve plan.

Institutional investors are increasingly positive about cryptocurrencies. Data from May 2025 shows that listed companies collectively increased their holdings by over 8,800 BTC, with firms like BlackRock continuously bullish on Bitcoin at industry conferences.

Notably, Bitcoin exhibits trading characteristics more closely related to global liquidity rather than retail sentiment. This means that volatility in traditional financial markets is more easily transmitted to the crypto market.

05 Escalation of Geopolitical Risks

When the US and Europe are tense over Greenland, market uncertainty reaches new heights. The US-European relationship framework established during Biden's administration faces a comprehensive overhaul, and reactions from European countries to Trump's tariff threats vary.

Wall Street has begun betting on the so-called "TACO trading" scenario. Investors are closely watching whether Trump will "chicken out" as he has in the past, using tariff threats merely as negotiation leverage.

In such a scenario, market expectations become extremely complex. On one hand, tariff threats increase downward pressure on the dollar; on the other hand, if Trump actually uses tariffs as a negotiation tactic, the USD might gain some support.

For Europe, the costs of this game could be very high. Tariffs could further damage the Eurozone economy and weaken Europe's leverage over Russia regarding Ukraine.

06 Future Outlook

From a global perspective, TACO trading is not just a market strategy; it reflects the complex interaction between modern geopolitics and economics. Trump's policy oscillations create unique market dynamics, and investors must learn to find opportunities within this environment.

Geopolitically, the global markets in 2026 may face even more complex situations. Midterm election pressures could lead to more policy turbulence, with Greenland merely being the tip of the iceberg in great power rivalries.

In the crypto market, turbulence in traditional financial markets is creating new opportunities for digital assets. The continuous entry of institutional investors and improvements in market infrastructure are gradually making cryptocurrencies an essential part of global asset allocation.

As global markets fall into uncertainty again due to Greenland tariff threats, trading volumes on crypto exchanges have quietly increased. Fiat currency volatility has intensified, prompting investors to turn their attention to digital assets.

Trump's promise to buy 1 million Bitcoins at the Las Vegas Bitcoin Conference sharply contrasts with his image of wielding tariffs on the international stage. These seemingly contradictory actions outline a new era where the crypto world intertwines with traditional geopolitics.

Wall Street traders closely monitor every tweet from Trump, while crypto investors seek opportunities in the gaps of global asset flows.