Risk assets including cryptocurrencies suffered steep declines on Monday and Tuesday as traders grappled with concerns that proposed tariffs were on track to take effect.
That overshadowed the exuberance around Trump’s so named US strategic crypto reserve, which some traders had hoped would pull bitcoin out of slump. After reaching its record in January, it posted its worst month since 2022 in February.
Monday’s sell-off triggered a wave of $1.07 billion liquidations in the last 24 hours and these market instabilities have led to increased market fear, with the Greed and Fear Index indicating levels closer to ‘Extreme Fear.’ This level of fear was last seen in the last quarter of 2022, following the fall of Terra Luna & FTX. Global equity markets have also suffered. The Dow Jones Industrial Average, S&P 500 & Nasdaq recorded sharp declines.
Uldis Teraudklans, chief revenue officer at Paybis, said: “The current market outlook has seen Bitcoin price drop as low as 11.47 per cent year-to-date. However, against the BTC price outlook, gold rallied by 10.65 per cent YTD, having experienced a similar macroeconomic uncertainty to Bitcoin’s.”
In a February update from Bank of America, gold retained confidence among 58 per cent of surveyed fund managers as a store of value in case of a trade war. 15 per cent consider the US Dollar a worthy store of value, while only 3 per cent of these Fund Managers show confidence in Bitcoin. Thus far this year, Bitcoin has proven more reactive to macroeconomic trends, including trade wars and interest rate trends. With large Wall Street firms now exposed to the coin, it is more susceptible to significant liquidity flows, thus contributing to its volatility. Bitcoin price recorded a 17.39 per cent decline in February, the largest drop since 2014, and the only negative Feb in a post-halving year. This decline can be attributed to a loss of institutional appetite for risk assets, driven by the trade and tariff tensions initiated by the Trump administration. Bitcoin’s correlation with the S&P 500 has further contributed to the decline.
Bitcoin has never been a safe-haven asset — only an aspirational one. Yet, the promise remains, and with every cycle, critics revisit this so-called “failure.” My perspective is that Bitcoin has consistently been a risk asset, following a long-term trajectory toward becoming a safe-haven, risk-off asset. This was true in previous cycles and remains true today. Only when Bitcoin reaches the market capitalization of gold can we seriously evaluate whether it can replace it as a safe-haven asset,”
