Instead of anticipated growth, the crypto market faced a sharp drop in value following U.S. President Donald Trump's announcement about a strategic crypto reserve.
Announcement and Its Consequences
Following Trump's announcement concerning the establishment of a strategic crypto reserve, the market surged from $2.7 trillion to $3.1 trillion in 10 hours but soon lost all gains, falling to $2.6 trillion. This resulted in a record $2.6 billion outflow from crypto funds. Bitcoin dropped 3%, losing nearly $250 billion in market cap, while Ethereum decreased by 8%.
Is Crypto No Longer a Safe Haven?
Recent trade tensions between the U.S., Canada, Mexico, and China have added further market instability. In uncertainty, investors are relying more on gold as a safe asset, reducing Bitcoin's role in this capacity. Gold has risen by 10%, while Bitcoin has fallen by 10%.
Upswings and Downswings Ahead
Analysts also warn of potential increased volatility in the market. Goldman Sachs's volatility panic index has risen to significant levels, indicating a new norm for the index. In a survey by Bank of America, only 3% of investors have confidence in Bitcoin under a full-scale trade war.
The crypto market remains unstable amidst global macroeconomic developments, yet long-term prospects, given the structural trends, remain favorable.
