Despite Bitcoin experiencing a 2.2% increase on April 1, BTC has not traded above $89,000 since March 7. Although recent price declines are often attributed to the rising US-led global trade conflict, several factors had already been impacting investor sentiment well before President Donald Trump introduced the tariffs.
Some market participants argue that Strategy’s acquisition of $5.25 billion worth of Bitcoin since February is the main driver keeping BTC above the $80,000 support level. Nevertheless, irrespective of who the buyers might be, it’s evident that Bitcoin was already exhibiting limited upward potential prior to President Trump’s announcement of a 10% tariff on Chinese imports on January 21.
Gold/USD (left) vs. Bitcoin/USD (right). Source: TradingView / Cointelegraph
The S&P 500 index reached an all-time high on February 19, just 30 days after the trade war commenced, while Bitcoin struggled to maintain levels above $100,000 for the preceding three months. Although the trade dispute certainly impacted investor risk appetite, compelling evidence suggests Bitcoin’s price weakness initiated well before President Trump took office on January 20.
Spot Bitcoin ETFs inflows, strategic Bitcoin reserve expectations, and inflationary trends
Another significant data point that diminishes the link to tariffs is the spot Bitcoin exchange-traded funds (ETFs), which registered $2.75 billion in net inflows in the three weeks following January 21. By February 18, the US had declared intentions to impose tariffs on imports from Canada and Mexico, while the European Union and China had already retaliated. Essentially, institutional interest in Bitcoin persisted despite the escalating trade conflict.
Part of Bitcoin traders’ disillusionment post-January 21 arises from inflated expectations surrounding President Trump’s campaign pledge for a “strategic national Bitcoin stockpile,” referenced at the Bitcoin Conference in July 2024. As investors grew restless, their frustrations peaked when the actual executive order was announced on March 6.
A crucial factor contributing to Bitcoin’s difficulty in surpassing $89,000 is an inflationary trend, indicative of a relatively effective strategy by global central banks. In February, the US Personal Consumption Expenditures (PCE) Price Index saw a year-over-year increase of 2.5%, while the eurozone Consumer Price Index (CPI) rose by 2.2% in March.
Investors become more risk-averse following weak job market data
In the latter half of 2022, Bitcoin’s price gains were fueled by inflation exceeding 5%, indicating that businesses and households turned to cryptocurrency as a safeguard against monetary devaluation. However, if inflation remains under control into 2025, lower interest rates may benefit real estate and stock markets more directly than Bitcoin, as reduced financing costs enhance those sectors.
US CPI inflation (left) vs. US 2-year Treasury yield (right). Source: TradingView
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The declining job market further diminishes traders’ appetite for risk-on assets, including Bitcoin. In February, the US Labor Department reported job openings at a near four-year low. Likewise, yields on the US 2-year Treasury declined to a six-month low, with investors accepting a modest 3.88% return for the security of government-backed instruments. This data implies a growing preference for risk aversion, which is detrimental to Bitcoin.
Ultimately, Bitcoin’s price struggles can be attributed to investors’ unrealistic expectations regarding BTC purchases by the US Treasury, falling inflation supporting potential interest rate reductions, and a macroeconomic environment increasingly favoring risk aversion as investors gravitate toward short-term government bonds. Although the trade conflict has exerted negative influences, Bitcoin had already begun to show signs of weakness prior to its onset.
This article is for general information purposes only and is not intended as legal or investment advice. The views, thoughts, and opinions expressed herein are solely those of the author and do not necessarily reflect the views or opinions of Cointelegraph.
