Bitcoin’s
BTCUSD
experienced a 7% drop, decreasing from $88,060 on March 26 to $82,036 on March 29, resulting in $158 million in long liquidations. This decline raised concerns among bullish investors, especially as gold reached an all-time high simultaneously, challenging Bitcoin’s narrative as “digital gold.” Nevertheless, numerous analysts believe a Bitcoin recovery is on the horizon as various governments are taking measures to prevent an economic downturn.
The ongoing global trade war and the US government’s budget cuts are regarded as temporary obstacles. A positive outlook is the anticipated influx of additional liquidity into the markets, which could benefit risk-on assets. Analysts suggest that Bitcoin is strategically positioned to thrive amid this wider macroeconomic transition.
Consider Mihaimihale, a user from the X social platform, who indicated that tax reductions and lower interest rates are vital to “revitalize” the economy, particularly because last year’s growth was largely “supported” by governmental expenditures, which were not sustainable.
The adverse macroeconomic climate contributed to gold reaching a record high of $3,087 on March 28, while the US dollar faced depreciation against other currencies, with the DXY Index falling from 107.40 to 104 within a month.
Moreover, the $93 million in net outflows from spot Bitcoin exchange-traded funds (ETFs) on March 28 further dampened sentiment, highlighting that even institutional investors might sell amidst growing recession concerns.
US Inflation Slows Amid Economic Recession Fears
The current market indicates a 50% chance that the US Federal Reserve will reduce interest rates to 4% or lower by July 30, an increase from 46% a month prior, as per the CME FedWatch tool.
According to Alexandre Vasarhelyi, the founding partner at B2V Crypto, the crypto market is currently in a “withdrawal phase.” He noted that recent significant announcements, such as the executive order on the US strategic Bitcoin reserve, signify progress in the key metric of adoption.
While Vasarhelyi pointed out that real-world asset (RWA) tokenization is a promising trend, he believes its effects are still relatively minor. He stated, “BlackRock’s billion-dollar BUIDL fund is a positive step, but it pales in comparison to the $100 trillion bond market.”
Vasarhelyi also remarked:
“Whether Bitcoin’s base is $77,000 or $65,000 is insignificant; the narrative is one of early-stage growth.”
Gold Decouples from Stocks, Bonds, and Bitcoin
Seasoned traders typically view a 10% correction in the stock market as normal. Nonetheless, some predict a decrease in “policy uncertainty” by early April, potentially lowering the chances of a recession or bear market.
Warren Pies, founder of 3F Research, anticipates a softening of the US administration’s stance on tariffs, which may stabilize investor confidence. This change could help the S&P 500 maintain its position above the March 13 low of 5,505. However, market volatility continues to be a factor as economic conditions change.
For some observers, gold’s decoupling from the stock market while Bitcoin faced “extreme fear” is proof that the digital gold thesis was flawed. Yet, more seasoned investors like Vasarhelyi argue that Bitcoin’s lackluster performance highlights its ongoing early-stage adoption rather than a failure of its inherent qualities.
Vasarhelyi stated,
“Legislative changes are paving the way for user-friendly products, trading some of crypto’s flexibility for greater mainstream appeal. I believe adoption will quicken, but 2025 will remain a foundational year, not a turning point.”
Recent analyst perspectives consider the recent Bitcoin downturn a reaction to recession fears and the ongoing tariff war. However, they anticipate that these elements will lead central banks to adopt expansionary strategies, ultimately fostering a conducive environment for risk-on assets, including Bitcoin.
This article is intended solely for informational purposes and does not represent legal or investment advice. The views, thoughts, and opinions expressed herein belong solely to the author and do not necessarily reflect the views or opinions of Cointelegraph.
