- Donald Trump's flip-flopping tariff policies are sinking the markets.
- Technical indicators are flashing red.
- The bull run may be over.
Well that was quick.
Just 16 months after the cryptocurrency market reversed a grinding slide and reached all-time highs in the “euphoria zone,” the bull market is collapsing.
US President Donald Trump has spooked investors across the board with zig-zagging tariff policies ahead of a key Federal Reserve meeting on Wednesday. The jitters have sent gold to records and technology stocks tumbling.
“Every onchain metric signals a bear market,” said Ki Young Ju, the CEO CryptoQuant, a crypto analytics firm.
“With fresh liquidity drying up, new whales are selling Bitcoin at lower prices,” he said on X on March 17.
Ju added a stark prediction: Expect six to 12 months of bearish or sideways price action.
Heading sideways
After more than doubling in 2024, the total value of cryptocurrencies has dropped 27%, to $2.8 trillion, since Trump was inaugurated as president on January 20.
Bitcoin has skidded 16%, to $81,602, in the last 30 days as Trump has rocked the capital markets with his flip-flopping tariffs on imports from Canada and Mexico, the US’ top two trading partners, as well as China.
Other markets are also plunging.
The bellwether S&P 500 Index has fallen 8.6% in the last month, and the tech-heavy Nasdaq is down even more.
The share price of Tesla, the electric vehicle juggernaut led by Elon Musk, has nosedived an astonishing 47% since he started work as the administration’s cost-cutting czar.
Risk-off
The next big marker will be the Fed’s call on interest rates.
Before Trump was elected, the economy had been growing and inflation had fallen to a three-year low.
Now Trump is telegraphing a recession.
Moreover, tariffs tend to pass along price hikes to consumers and businesses so the Fed may be inclined to hold off on lowering rates to avoid exacerbating inflation.
‘If the Fed maintains a hawkish stance a significant price recovery in the short term is unlikely.’
— James Butterfill, CoinShares.
Investors in risk-on assets such as stocks and cryptocurrencies won’t like that at all.
Those asset classes tend to surge when rates fall as the market rotates out of fixed income instruments such as bonds into juicier risk-on securities.
When rates stay high or rise, investors seek returns from bonds, and safety in gold, which is at an all-time high of $3,035 an ounce.
“Investors are less willing to take on risky bets,” Eliezer Ndinga, the head of strategy at 21Shares, a crypto ETP provider, told DL News.
Hedging bets
Over the past five weeks, institutional investors withdrew more than $6 billion from Bitcoin ETFs, according to James Butterfill, head of research at crypto research firm CoinShares.
And uncertainty is the watchword of the moment.
Ndinga said geopolitical tensions, supply-chain snags, corporate earnings concerns, among others — tends to push people out of volatile assets.
“When you look at the recent slide in Bitcoin and other cryptocurrencies, it’s really a reflection of the broader mood in financial markets right now,” Ndinga said.
Even so, he isn’t as bearish about Bitcoin.
“We’re still seeing consistent Bitcoin accumulation from long-term holders,” Ndinga said.
Arthur Hayes, the angel investor and crypto veteran, remains unfazed.
He reckons Bitcoin’s correction is a temporary liquidity squeeze. Once that cycle turns, it will soar to $250,000 by year-end, he said in a March 14 interview with Bitcoin.com News.
But for now, Bitcoin could very well revisit $74,000, he said.
Macro storm
On Wednesday, all eyes will turn to the Federal Open Market Committee meeting.
“If the Fed maintains a hawkish stance, a significant price recovery in the short term is unlikely,” Butterfill told DL News.
James Check, former senior Glassnode analyst, says stasis may be the best bet.
“My base case is that we probably have to chop around inside this air-pocket for a little while yet,” Check wrote in his newsletter “Checkonchain” on March 17.
The “Air Pocket” he’s referring to is a range between Bitcoin’s previous all-time high of $74,000 and $86,000 — a gap that was overshot by investors who bought into Trump’s pro-crypto campaign slogans.
“The macro storm isn’t over yet, so I am staying cautious,” Check said.
Pedro Solimano is a markets correspondent based in Buenos Aires. Got a tip? Email him at psolimano@dlnews.com.