Bitcoin prices have been fluctuating recently, influenced by various macroeconomic factors and investor expectations. Tariffs have had an impact, but other factors were also at play.
Tariffs and Macroeconomic Conditions
Despite Bitcoin's 2.2% gains on April 1, BTC hasn't traded above $89,000 since March 7. While the recent price weakness is often linked to the escalating US-led global trade war, several factors had already been weighing on investor sentiment. Some market participants claimed that Strategy’s $5.25 billion worth of Bitcoin purchases provided support above $80,000. However, Bitcoin already showed limited upside before trade tariffs were announced on January 21.
Reserve Strategy and Inflationary Trends
Bitcoin ETFs saw $2.75 billion in net inflows during the three weeks following January 21, reflecting persistent institutional demand. Part of traders’ disappointment is due to unmet expectations from 2024 regarding a strategic national Bitcoin stockpile. A key factor in Bitcoin’s struggle is inflationary trends. In the US, the PCE Price Index rose 2.5% in February, while the eurozone CPI increased 2.2% in March.
Risk Aversion Amid Economic Uncertainty
The second half of 2022 saw Bitcoin gains driven by inflation soaring above 5%, prompting crypto as a hedge against monetary debasement. However, if inflation remains under control in 2025, lower interest rates may more directly favor real estate and stock markets. Weak job market data also dampens traders’ demand for risk-on assets, including Bitcoin. In February, US job openings fell to a four-year low, signaling a rising choice for risk aversion.
Bitcoin’s price weakness stems from investor expectations, inflation trends, and a more risk-averse macroeconomic environment. While the trade war has had negative effects, Bitcoin was already showing signs of weakness before it began.
