Up to now, the performance of crypto markets has not aligned with the expectations during the Trump Administration. Investors anticipated that regulatory changes and initiatives like a Bitcoin Strategic Reserve would significantly boost prices. However, the results have been quite the opposite. Bitcoin’s value has dropped from over $100,000 at the start of the year to a low in the mid-$80,000s throughout most of March.
The decline in crypto prices can be attributed to an increasing correlation with traditional assets such as stocks and bonds, which have been adversely affected by macroeconomic uncertainties. The imposition of tariffs—additional charges the U.S. applies to imports from other nations—has sparked concerns of a global recession on Wall Street. This has led crypto investors to shy away from crypto assets, which are perceived as relatively high-risk investments.
“The current scenario revolves around the markets’ diminishing ‘risk appetite,’ which continues to widen the gap between crypto assets and gold, the latter being viewed as the preferred ‘safe haven,’” noted Marc Ostwald, Chief Economist & Global Strategist at ADM Investor Services International.
“This shift is largely influenced by central bank foreign exchange reserve managers who are striving to decrease their exposure to USD, a longstanding concern for them.”
As the global financial and trade environment becomes increasingly fragmented, investors are on the lookout for safer alternatives to riskier assets, including the dollar. Currently, this trend leads them towards gold, which has seen an 18% increase year-to-date.
However, Omid Malekan, an adjunct professor at Columbia Business School and the author of “The Story of the Blockchain: A Beginner’s Guide to the Technology That Nobody Understands,” warns that this situation could shift. Bitcoin may soon emerge as the new gold.
“The future is inherently unpredictable and somewhat unfathomable, given the numerous crosscurrents at play; both crypto and tariffs are relatively novel. Some believe that crypto is merely a risk-on tech asset and could be affected adversely by tariffs. Conversely, Bitcoin has garnered recognition in certain circles as ‘digital gold,’ and its physical counterpart is thriving amid the tariff discussions. So, which narrative will prevail?”
Essentially, the looming economic uncertainty might prompt investors to turn to Bitcoin just as they have gravitated towards gold in recent months.
On a more positive note, Zach Pandl, head of research at Grayscale, a leading crypto asset management firm, suggests that the repercussions of tariffs on cryptocurrencies could already be “priced in,” implying the worst may have passed.
On Wednesday, April 2, at 4 p.m. ET—referred to as “Liberation Day”—President Trump is set to unveil U.S. tariffs. Reports indicate that he will outline “reciprocal tariffs” targeting 15 nations that have imposed tariffs against the United States, including China, Canada, and Mexico.
Pandl anticipates that tariffs have so far detracted approximately 2% from this year’s economic growth. However, Liberation Day might signal an end to the most challenging periods for financial markets. “If the announcement on Wednesday is strict yet phased, focused on the 15 countries being targeted, I expect markets to respond positively,” Pandl remarked to CoinDesk.
“Once this announcement is behind us, it’s possible the crypto markets can shift their focus back to the fundamentally strong factors at play.”
Pandl emphasized that developments like Circle’s IPO wouldn’t be occurring unless institutional players possessed a high degree of confidence in the digital assets sector and its regulatory framework.
Additionally, Pandl, a former macro-economist at Goldman Sachs, foresees that tariffs could diminish the dollar’s prevailing status and create opportunities for alternative currencies, including Bitcoin.
“I believe tariffs will weaken the USD’s dominance and pave the way for competitors like Bitcoin. Although prices have decreased in the short term, my conviction in Bitcoin’s potential as a global monetary asset has only strengthened following the initial months of the Trump Administration.”
Pandl retains his belief that Bitcoin will reach new all-time highs this year, despite the current pessimistic sentiment surrounding its prices. “I wouldn’t have left my Wall Street position if I didn’t believe Bitcoin would emerge as the long-term victor,” he remarked.
