The cryptocurrency market has exhibited behavior that deviates from the expectations set forth by investors during the Trump Administration. There were hopes that regulatory reforms, alongside initiatives such as a Bitcoin Strategic Reserve, would propel prices significantly higher. However, the reality has been a stark contrast, with Bitcoin experiencing a decline from its highs above $100,000 at the beginning of the year to lingering in the mid-$80,000 range throughout March.
One of the key factors contributing to the downward trajectory of crypto prices is their increasing correlation with traditional financial assets, such as stocks and bonds. These markets have been adversely affected by macroeconomic uncertainty, particularly due to tariffs imposed by the U.S. on imports from various countries, which have ignited concerns about a potential global recession. Consequently, investors have become wary of crypto assets, often seen as inherently risky.
As Marc Ostwald, Chief Economist and Global Strategist at ADM Investor Services International, points out, “This is all about markets’ ‘risk appetite’ which continues to deteriorate, and for the time being drives a wedge between crypto assets and gold, which continues to be the ‘safe haven’ of choice.”
Central bank foreign exchange reserve managers contribute significantly to this shift in preference. There has been a growing effort to reduce exposure to U.S. dollars, which has historically been a concern for them. As the global financial and trade system becomes increasingly fragmented, investors are actively seeking alternatives to riskier assets, leading them to favor gold—a commodity that has risen 18% year-to-date.
However, the narrative surrounding Bitcoin may change, as noted by Omid Malekan, an adjunct professor at Columbia Business School. He suggests that Bitcoin could emerge as the new gold as economic conditions evolve.
“I think the entire [future] is uncertain and in some ways unknowable, because there are many crosscurrents and both crypto and tariffs are new. Some people argue that crypto is just a risk-on tech asset and would sell off due to tariffs. But bitcoin has found footing in some circles as ‘digital gold’ and the physical variety is soaring on the tariff news. So which will it be?”
This uncertainty hints that economic turbulence may lead investors to eventually consider Bitcoin as a viable asset, akin to how they have gravitated toward gold recently.
Conversely, Zach Pandl, head of research at Grayscale, posits that the impact of tariffs on the crypto market might already be “priced in,” suggesting the worst could be behind us. With President Trump scheduled to announce U.S. tariffs on April 2, 2023, at 4 p.m. ET—known colloquially as “Liberation Day”—Pandl anticipates that if the tariffs announced are tough yet phased, markets may react positively. He believes such news could allow crypto markets to refocus on the fundamentals that remain exceptionally strong.
Furthermore, Pandl’s insights reveal a potentially positive shift. He asserts, “I think tariffs will weaken the dominant role of the dollar and create space for competitors including bitcoin. Prices have gone down in the short run. But the first few months of the Trump Administration have raised my conviction in the longer term for bitcoin as a global monetary asset.” His confidence in Bitcoin’s potential to hit new all-time highs this year, despite current market pessimism, speaks volumes about broader optimism for the cryptocurrency.
