Although Bitcoin saw a slight increase of 2.2% on April 1, it has failed to break the USD 89,000 mark since the beginning of March. Although its decline is often attributed to the global trade war started by President Donald Trump, the real reasons for investors’ decline go much deeper. Weakened sentiment was evident before talk of tariffs even began.
What is really affecting the price of bitcoin?
One of the key factors helping bitcoin stay above the USD 80,000 level is the large USD 5.25 billion purchase that has been underway since February. While this may have temporarily prevented a sharp fall, expectations of further growth were already tempered before the announcement of the tariff measures on January 21. Moreover, Bitcoin has repeatedly failed to stay above the psychological USD 100,000 threshold in previous months, pointing to deeper structural problems than just geopolitical tensions.
Also, developments around spot bitcoin ETFs suggest that investor sentiment is driven by more factors than just policy decisions. Despite the escalation of the trade war, ETFs saw inflows of USD 2.75 billion after 21 January. Institutional interest thus persisted, but was beginning to be eroded by disappointing unrealised promises such as the “strategic national bitcoin reserve”, which President Trump spoke about as early as July 2024.
Inflation, the labour market and a return to certainty
Another negative influence on the bitcoin price is the current inflationary environment. Successful central bank measures have led to a stabilisation of inflation, with the PCE index rising by 2.5% in the US and the CPI reaching 2.2% in the Eurozone. These relatively calm figures reduce upward pressure on the value of risk assets such as bitcoin. Investor frustration then peaked after the March 6 executive order, which fell far short of initial expectations.
Labour market data also played a part in the market’s final weakening, pointing to greater investor caution. The number of job openings in the US fell to a four-year low, and the yield on two-year Treasury bonds fell to 3.88%. The growing preference for safe assets, such as Treasuries, is shifting attention away from riskier instruments, including cryptocurrencies. Thus, all indications are that bitcoin’s current stagnation is the result of a complex combination of disappointed expectations, monetary stability and a slowing economy.
