Under the Trump Administration, the behavior of crypto markets has not followed the expected trajectory. Investors were optimistic that regulatory reforms and policies such as a Bitcoin Strategic Reserve would drive prices significantly higher. However, the opposite has occurred. Bitcoin has experienced a decline from its highs well above $100,000 earlier in the year to a low in the mid-80,000s for most of March.
The correlation between crypto prices and traditional assets like stocks and bonds has increased, as both have been impacted by macroeconomic uncertainty. The imposition of tariffs by the U.S. on imports from other countries has raised concerns on Wall Street about a potential global recession. Consequently, crypto investors have been avoiding crypto assets due to their perceived riskiness.
According to Marc Ostwald, Chief Economist & Global Strategist at ADM Investor Services International, the current market conditions are driven by a decrease in risk appetite, leading to a divergence between crypto assets and gold. Central bank FX reserve managers are looking to reduce exposure to the USD, which has been a long-standing concern for them.
Amidst a more fragmented global financial and trade system, investors are seeking alternatives to riskier assets, such as the dollar. Currently, gold has seen an 18% increase year-to-date. However, Omid Malekan, an adjunct professor at Columbia Business School, believes that Bitcoin could emerge as the new gold in the near future.
While economic uncertainty persists, some experts suggest that the impact of tariffs on crypto may already be factored into prices, and the worst may be over. Zach Pandl, head of research at Grayscale, anticipates that markets could rally following President Trump’s announcement of reciprocal tariffs on April 2. This event, dubbed “Liberation Day,” may alleviate some of the financial market distress caused by tariffs.
Looking ahead, Pandl remains optimistic about the digital assets sector, citing recent developments such as Circle’s IPO as signs of institutional confidence in the industry. He predicts that tariffs could weaken the dominance of the dollar, creating opportunities for alternative currencies like bitcoin to thrive. Despite short-term price fluctuations, Pandl believes in the long-term potential of bitcoin as a global monetary asset.
