Here is the rewritten content:

Bitcoin’s Price Weakness: Beyond the Trade War

The Reality of Bitcoin’s Price Performance

Despite Bitcoin’s 2.2% gains on April 1, BTC (BTC) hasn’t traded above $89,000 since March 7. Some market participants claimed that Strategy’s $5.25 billion worth of Bitcoin purchases since February is the primary reason BTC has held above the $80,000 support. However, the reality is that Bitcoin was already showing limited upside before President Trump announced the 10% Chinese import tariffs on January 21.

The S&P 500 index hit an all-time high on February 19, exactly 30 days after the trade war began, while Bitcoin had repeatedly failed to hold above $100,000 for the previous three months. Although the trade war certainly affected investor risk appetite, strong evidence suggests Bitcoin’s price weakness started well before President Trump took office on January 20.

Spot Bitcoin ETFs Inflows, Strategic Bitcoin Reserve Expectations, and Inflationary Trends

Another data point that weakens the relation with tariffs is the spot Bitcoin exchange-traded funds (ETFs), which saw $2.75 billion in net inflows during the three weeks following January 21. By February 18, the US had announced plans to impose tariffs on imports from Canada and Mexico, while the European Union and China had already retaliated. In essence, institutional demand for Bitcoin persisted even as the trade war escalated.

Part of Bitcoin traders’ disappointment after January 21 stems from excessive expectations surrounding President Trump’s campaign promise of a “strategic national Bitcoin stockpile,” mentioned at the Bitcoin Conference in July 2024. As investors grew impatient, their frustration peaked when the actual executive order was issued on March 6.

A key factor behind Bitcoin’s struggle to break above $89,000 is an inflationary trend, reflecting a relatively successful strategy by global central banks. In February, the US Personal Consumption Expenditures (PCE) Price Index rose 2.5% year-over-year, while the eurozone Consumer Price Index (CPI) increased by 2.2% in March.

Investors Turn More Risk-Averse Following Weak Job Market Data

In the second half of 2022, Bitcoin’s gains were driven by inflation soaring above 5%, suggesting that businesses and families turned to cryptocurrency as a hedge against monetary debasement. However, if inflation remains relatively under control in 2025, lower interest rates would favor real estate and stock markets more directly than Bitcoin, as reduced financing costs boost those sectors.

The weakening job market also dampens traders’ demand for risk-on assets, including Bitcoin. In February, the US Labor Department reported job openings near a four-year low. Similarly, yields on the US 2-year Treasury fell to a six-month low, with investors accepting a modest 3.88% return for the safety of government-backed instruments. This data suggests a rising choice for risk aversion, which is unfavorable for Bitcoin.

Conclusion

In conclusion, Bitcoin’s price weakness is not solely attributed to the trade war. Several factors have been weighing on investor sentiment long before President Trump announced the tariffs. The reality is that Bitcoin’s price was already showing limited upside before the trade war began, and the subsequent events only exacerbated the situation. Investors’ unrealistic expectations, declining inflation, and a more risk-averse macroeconomic environment have all contributed to Bitcoin’s struggle to break above $89,000.

FAQs

What is the main reason for Bitcoin’s price weakness? Several factors have been weighing on investor sentiment, including declining inflation, a more risk-averse macroeconomic environment, and unrealistic expectations.
How has the trade war affected Bitcoin’s price? While the trade war has had a negative impact, Bitcoin’s price was already showing limited upside before it began.
What is the role of spot Bitcoin ETFs in the price weakness? Spot Bitcoin ETFs saw $2.75 billion in net inflows during the three weeks following January 21, indicating persistent institutional demand for Bitcoin.
What is the current state of the job market? The US job market has weakened, with job openings near a four-year low, and yields on the US 2-year Treasury falling to a six-month low.
What is the impact of inflation on Bitcoin’s price? Inflation has been relatively under control, which could lead to lower interest rates and favor real estate and stock markets more directly than Bitcoin.