Shares of the iShares Bitcoin Trust ETF (IBIT -2.39%) experienced a 17% decline in February, as reported by S&P Global Market Intelligence. The BlackRock exchange-traded fund primarily mirrors the price fluctuations of Bitcoin.
Similar to various high-risk assets, the Bitcoin ETF faced a steep downturn in February as investor anxiety regarding the economy intensified. This unease stemmed from plummeting consumer sentiment figures, amidst President Trump’s tariff threats against multiple countries and widespread federal layoffs that raised recession concerns.
Bitcoin has yet to prove its status as a safe haven
Supporters of Bitcoin have promoted its potential as a reliable store of value amid inflation-driven currency devaluation. However, historical market behavior has shown that the cryptocurrency tends to act more like an unstable technology stock.
In 2022, when inflation surged, it might have been expected that Bitcoin would stand firm as a hedge, as many had anticipated. Instead, its price tumbled—mirroring the decline of stocks across various sectors—before eventually rebounding.
Entering February, the cryptocurrency was priced near its all-time highs, exceeding $100,000, following a significant increase after the November elections. President Trump had pledged to deregulate the cryptocurrency sector and position America as the “Bitcoin capital of the world,” along with intentions to establish a Strategic Bitcoin Reserve.
Nonetheless, just like numerous stocks that soared following the election, the digital asset soon retraced its steps as economic instability diminished the post-election surge. Tariff concerns emerged throughout February, as the administration announced a one-month postponement on tariffs concerning Mexico, Canada, and China that were initially set for February 1.
As February progressed, the threat of tariffs and federal layoffs under the Department of Government Efficiency program escalated as the deadline approached, leading to several adverse consumer sentiment readings. The anticipated tariffs eventually took effect on March 4, although on Thursday, the administration granted another one-month deferment for specific goods included under the 2020 U.S.-Mexico-Canada trade agreement.
All of this uncertainty contributed to investor fears of an impending economic downturn in late February, prompting a retreat from risk assets, including Bitcoin.
What’s next for Bitcoin?
It seems that Trump is at least following through on one of his commitments: the establishment of a Strategic Bitcoin Reserve, at least partially. On Thursday, David Sacks, the administration’s “crypto czar,” revealed that the president had signed an executive order to create this reserve. However, it won’t involve new government purchases but rather consist of the approximately 200,000 bitcoins already confiscated through criminal and civil proceedings.
Sacks noted that the government had previously liquidated $366 million worth of seized Bitcoin, and those assets would have been valued at $17 billion today had they been retained. Additionally, he indicated that the executive order permits the Treasury and Commerce departments to acquire more Bitcoin in “budget-neutral ways,” likely implying the absence of direct taxpayer funding.
Bitcoin advocates may have anticipated more substantial action following the election, with hopes for regular government purchases of the cryptocurrency to bolster market demand. Significantly, the cryptocurrency remained near its year-to-date lows, even following Sacks’ announcement.
