- Bitcoin has struggled to trade above $89,000 since March 7, with price weakness beginning before the US-initiated global trade war.
- Investor disappointment stems partly from unrealized expectations about a “strategic national Bitcoin stockpile” promised during Trump’s campaign.
- Lower inflation rates and a weakening job market have shifted investor sentiment toward less risky assets, affecting Bitcoin’s performance.
Despite gaining 2.2% on April 1, Bitcoin has not traded above $89,000 since March 7. While many attribute this weakness to the escalating US-led global trade war, evidence suggests Bitcoin was already struggling well before President Donald Trump announced tariffs on Chinese imports on January 21.
Some market participants have claimed that Strategy’s $5.25 billion Bitcoin purchases since February helped maintain support at $80,000. However, Bitcoin had repeatedly failed to sustain levels above $100,000 for three months prior to the trade war announcement, even as the S&P 500 reached all-time highs on February 19.
Institutional interest remained strong despite trade tensions, with spot Bitcoin ETFs attracting $2.75 billion in net inflows during the three weeks following January 21. This continued even as the US announced additional tariffs on Canadian and Mexican imports, and as the European Union and China implemented retaliatory measures.
Unfulfilled expectations and inflation trends
A significant factor affecting trader sentiment was disappointment regarding Trump’s campaign promise of a “strategic national Bitcoin stockpile,” mentioned at the Bitcoin Conference in July 2024. Investor frustration peaked when the actual executive order was issued on March 6, apparently not meeting market expectations.
Bitcoin’s struggle also coincides with relatively controlled inflation. February’s US Personal Consumption Expenditures Price Index rose 2.5% year-over-year, while the eurozone’s Consumer Price Index increased by 2.2% in March. This contrasts with 2022, when Bitcoin gained strength as inflation soared above 5%.
Risk aversion rises amid economic uncertainty
The weakening job market has further dampened demand for risk-on assets like Bitcoin. The US Labor Department reported job openings near a four-year low in February. Similarly, yields on US 2-year Treasury bonds fell to a six-month low of 3.88%, indicating investors’ preference for safer government-backed instruments.
Bitcoin’s recent performance reflects a combination of unrealistic expectations about government purchases, declining inflation supporting potential interest rate cuts, and a risk-averse macroeconomic environment. While trade war tensions have contributed to market uncertainty, Bitcoin was already showing weakness before these developments began.
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