Bitcoin (BTC) experienced a 7% drop, decreasing from $88,060 on March 26 to $82,036 by March 29, resulting in $158 million in long liquidations. This decline raised concerns among bulls, particularly as gold surged to an all-time high simultaneously, challenging Bitcoin’s narrative as “digital gold.” Nonetheless, many analysts believe a Bitcoin rally is on the horizon due to various governments implementing measures to prevent an economic downturn.
The current global trade war and spending restrictions by the US government are seen as short-term hurdles. A potential upside is the anticipated influx of liquidity into markets, which could favor risk-on assets. Experts assert that Bitcoin is poised to capitalize on this larger macroeconomic shift.
Source: Mihaimihale
For instance, Mihaimihale, a user on the X social platform, suggested that tax cuts and lower interest rates are crucial to “kickstart” the economy, particularly since last year’s growth was “propped up” by unsustainable government spending.
The unfavorable macroeconomic climate led to gold reaching a historic high of $3,087 on March 28, while the US dollar weakened against various foreign currencies, with the DXY Index dropping to 104 from 107.40 a month prior.
Moreover, net outflows of $93 million from spot Bitcoin exchange-traded funds (ETFs) on March 28 further dampened market sentiment, as traders recognized that even institutional investors are vulnerable to selling amid rising recession fears.
US inflation slows amid economic recession fears
The market currently estimates 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, according to the CME FedWatch tool.
Implied rates for Fed Funds on July 30. Source: CME FedWatch
The cryptocurrency market is currently in a “withdrawal phase,” according to Alexandre Vasarhelyi, founding partner at B2V Crypto. Vasarhelyi mentioned that recent significant announcements, such as an executive order for a US strategic Bitcoin reserve, mark progress in the most critical area: adoption.
He noted that while real-world asset (RWA) tokenization is a promising trend, its impact remains limited. “BlackRock’s billion-dollar BUIDL fund signifies progress, but it’s negligible compared to the $100 trillion bond market.”
Vasarhelyi added:
“Whether Bitcoin’s floor is $77,000 or $65,000 matters little; the narrative is one of early-stage growth.”
Gold decouples from stocks, bonds, and Bitcoin
Seasoned traders consider a 10% correction in the stock market to be normal. However, some anticipate a reduction in “policy uncertainty” by early April, potentially decreasing the likelihood of a recession or bear market.
Source: WarrenPies
Warren Pies, founder of 3F Research, expects the US administration to soften its position on tariffs, which could enhance investor sentiment. This shift may help the S&P 500 maintain its position above its March 13 low of 5,505. Nevertheless, market volatility will continue to play a role as economic conditions change.
Related: Bitcoin price declines toward range lows, yet data reveals ‘whales going wild right now’
For some, the fact that gold has decoupled from the stock market while Bitcoin fell under “extreme fear” highlights flaws in the digital gold argument. However, seasoned investors, including Vasarhelyi, argue that Bitcoin’s subdued performance reflects its early-stage adoption instead of failing to meet fundamental expectations.
Vasarhelyi stated,
“Legislative changes prepare the way for user-friendly products, trading some of crypto’s flexibility for mainstream acceptance. In my view, adoption will accelerate, but 2025 will serve as a foundational year, not a pivotal point.”
Analysts consider the recent Bitcoin correction a response to recession anxieties and the temporary tariff conflict. Nonetheless, they expect these elements to prompt expansionary measures from central banks, ultimately fostering a positive outlook for risk-on assets like Bitcoin.
This article is intended for general informational purposes and should not be construed as legal or investment advice. The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.
