It’s easy to blame the US-led tariff war for Bitcoin’s drop in value, but traders may be exaggerating how much of an effect it has had. Bitcoin gained 2.2% on April 1, but it hasn’t been able to break above $89,000 since March 7. Even though the trade war still affects the market, Bitcoin’s problems started a long time before the 10% tariffs on Chinese imports were announced on January 21. Many big-picture economic and market forces have kept the price of cryptocurrencies stable, so it’s clear that the trade war is only one part of the picture.
Institutional Demand Strong Despite Trade War
If taxes were the main reason Bitcoin wasn’t doing well, institutional interest should have gone down. But research shows that’s not the case. Three weeks after the January 21 tariff news, $2.75 billion came into the spot Bitcoin ETFs. This indicates that institutional buyers stayed positive even after the trade war worsened.
Inflation and interest rate expectations impact.
The drop in inflation rates is a significant reason Bitcoin’s price isn’t moving much. Inflation rose above 5% in 2022, which made Bitcoin a popular way to protect against losing value. But new information shows a different picture. The US Personal Consumption Expenditures (PCE) Price Index went up by only 2.5% in February, while the CPI for the eurozone went up by 2.2% in March. As long as inflation stays low, buyers may choose safe investments like stocks and real estate, where interest rates are low.
Low Employment Increases Risk Aversion
The US job market is also worsening, slowing Bitcoin’s growth. According to the US Labor Department, job openings were almost at their lowest level in four years. At the same time, 2 year Treasury prices dropped to their lowest level in six months, at 3.88%. This means investors are shifting their money toward safer assets and are less interested in risky investments like Bitcoin.
Conclusion
The US-led tariff war has made the market less stable, but Bitcoin’s price problems were apparent before the January 21 tariff statement. While inflation rates have remained unchanged, institutional investors are still buying Bitcoin.
