Once viewed as a hedge against financial uncertainty, Bitcoin (BTC) struggles to maintain this title amid global economic shifts. Its market trajectory increasingly resembles that of traditional risk assets.

Since Donald Trump’s inauguration on January 20, the crypto market has seen an unprecedented decline, erasing nearly $1 trillion in value.

Bitcoin’s Changing Role in Financial Markets

Historically, Bitcoin has been considered a hedge, moving in tandem with gold during times of uncertainty. However, this trend has reversed since President Trump took office. While gold continues to rise, Bitcoin has undergone a severe correction, suggesting a fundamental shift in market perception.

“Since Trump became president on January 20, the market has dropped from $3.7 trillion to $2.5 trillion. This is strange cause the moment Trump took office marked a local top for crypto Even though he is the most pro-crypto president ever,” noted crypto analyst Symbiote.

One key factor in this change is Bitcoin’s growing correlation with traditional financial assets. In 2024, BTC moved in synchrony with the Nasdaq 100 and S&P 500 approximately 88% of the time, a stark contrast from its earlier role as a negative-correlated asset.

Now, the 30-day rolling correlation has dropped to around 40%. This suggests Bitcoin is now trading more like a high-risk technology stock than a hedge against inflation or economic turmoil.

Liquidity is another major concern. Since 2020, financial markets have been pricing in reduced liquidity, a trend severely affecting crypto. Market watchers note that liquidity flows back into the US dollar, which was historically the most stable asset during trade wars.

This shift has resulted in repeated flash crashes in crypto markets, increasing volatility and investor uncertainty. Coinglass data supports this trend, showing that Bitcoin ETF (Exchange-Traded Funds) assets under management (AUM) have dropped from $120 billion to $100 billion in weeks.

Additionally, decentralized finance (DeFi) has taken a hit. Data on DefiLlama shows the total locked value (TVL) dropping from the 2025 peak of $128.7 billion to $93.2 billion as of this writing. The decline signals a broad loss of confidence in crypto’s ability to provide financial stability during economic uncertainty.

Trump’s Trade War Fears Weigh on Crypto Sentiment

A recent Bank of America survey highlights growing fears about global trade wars. Specifically, 42% of respondents identified it as the most bearish development for risk assets in 2025, up from 30% in January.

“When asked which global development would be seen as the most bearish for risk assets in 2025, 42% said a global trade war, primarily due to the new Trump administration’s threats of new tariffs. That response is up from 30% that replied in January that a global trade war would be the most bearish,” Pensions & Investments reported.

Notably, only 3% of respondents believe Bitcoin would perform best in a full-blown trade war, starkly contrasting gold and the US dollar. These findings highlight a critical shift in perception—markets no longer see Bitcoin as a hedge in times of economic strife.

The pioneer crypto, which thrived during geopolitical instability, is now seen as too volatile to offer meaningful protection against financial shocks.

Furthermore, Goldman Sachs’ volatility panic index has surged from 1.4 in December to over 9.1, with expectations of even greater swings ahead. The Kobeissi Letter, a widely followed financial news source, suggests that Bitcoin’s price action will likely remain turbulent as trade war fears intensify.

Is There Hope for Bitcoin’s Revival? Experts Weigh In

Despite the bearish sentiment, some experts argue that Bitcoin still holds long-term potential. BeInCrypto recently reported how Bitcoin could serve as America’s financial lifeline amid soaring national debt. By embracing digital assets as part of a broader economic strategy, the US could leverage Bitcoin’s decentralized nature to maintain financial resilience.

“You can buy Bitcoin though as a way to vote with your dollars, send a clear message, and potentially even save the US long term. A return to the gold standard,” Coinbase CEO Brian Armstrong said.

Additionally, Bitcoin’s ability to provide liquidity to struggling companies remains a strong argument in its favor. BeInCrypto highlighted how firms looking to boost their stock performance have increasingly turned to Bitcoin as an alternative asset.

“We have a nice core business, but it’s too small to be relevant to the capital markets. I think as we start investing more into our Bitcoin treasury strategy, we’ll be able to create more liquidity in our stock and attract investors,” Bloomberg reported, citing Goodfood CEO Jonathan Ferrari.

If corporate adoption continues to grow, Bitcoin could regain its position as a critical financial tool rather than just another risk asset. Nevertheless, one idea is proving apparent: Bitcoin’s role in global finance is changing.

“I get the rationale for a Bitcoin reserve. I do not agree with it, but I get it. We have a gold reserve. Bitcoin is digital gold, which is better than analog gold,” BTC critic Peter Schiff admitted recently.

Bitcoin turns bearish as its weekend gains completely evaporate. Negative momentum was briefly halted thanks to Trump’s Crypto Reserve announcement, but the underlying macroeconomic problems remain.

Trump’s tariffs against its closest trading partners are still set to go through, and the Federal Reserve is predicting the worst decline in US GDP since the pandemic began. A broader recession will also hurt the crypto industry.

Bitcoin Drops 10% As Recession Seems Near

The price of Bitcoin has shown extreme volatility over the past few days. Last week, the Crypto Fear and Greed Index hit its lowest level since 2022, and Bitcoin looked very bearish due to several key factors.

Yesterday, Trump announced a crypto reserve that caused token prices to pump. However, that forward momentum has completely vanished today.

There are a few reasons that Bitcoin is looking so bearish right now. Essentially, Trump’s announcement may have only slapped a bandage on a very serious wound.

Last week, Bitcoin ETFs had their worst week ever, with $2.7 billion in outflows, as the Federal Reserve Bank of Atlanta predicted a 1.5% GDP decrease. Today, it has become even more pessimistic.

The Fed is now predicting that the US GDP will shrink 2.8% by the end of Q1 2025. From an economic perspective, this is apocalyptic compared to its predictions four weeks ago, which showed 3.9% growth.

Macroeconomic Factors Don’t Look Good for Crypto

The US economy hasn’t shrunk that much since the early days of the Covid-19 pandemic five years ago. These macroeconomic factors are a significant signal that Bitcoin might turn bearish in the short term. In fact, market liquidations have hit nearly $800 million today.

Another important factor contributing to Bitcoin’s volatility is President Trump’s proposed tariffs. Some analysts have theorized that they aren’t the main cause, and that’s probably true.

However, the crypto market crashed when Trump recently announced 25% tariffs on the EU, joining ones on Canada, Mexico, and China.

“Trump: no room left for deal on tariffs on Mexico, Canada. [He] reiterates plan to double China tariff from 10% to 20%,” claimed Walter Bloomberg via social media.

In other words, macroeconomic factors are largely driving market sentiment in the crypto industry. Since the Bitcoin ETFs were approved, crypto has been well-integrated into traditional finance.

If the US economy enters a recession, however, the downsides of that integration will fully reveal themselves.

The crypto market continues to face selling pressure as digital asset investment products recorded their largest weekly outflows.

Sentiment remains sour, with Bitcoin (BTC) barely holding above the psychological level of $90,000 despite President Donald Trump’s crypto reserve policy.

Crypto Outflows See New Records

Over the past week, crypto outflows reached a staggering $2.9 billion, bringing the three-week total to $3.8 billion. This marks the third consecutive week of capital exiting the crypto sector, and it is a stark contrast to the preceding 19-week inflow streak, which saw $29 billion pour into the market.

The latest CoinShares report ascribes the negative flows to weakening sentiment across the crypto market. It cites factors such as the recent Bybit hack among key factors contributing to the mounting outflows. Others include a more hawkish stance from the Federal Reserve and broader macroeconomic concerns.

“We believe several factors contributed to this trend, including the recent Bybit hack, a more hawkish Federal Reserve, and the preceding 19-week inflow streak totaling US$29bn. These elements likely led to a mix of profit-taking and weakened sentiment toward the asset class,” read an excerpt in the report.

As BeInCrypto reported, the hack, which resulted in millions of dollars stolen, has shaken investor confidence. This reinforces fears over security vulnerabilities in the crypto space. Additionally, the Federal Reserve’s latest comments signaled a cautious outlook on inflation and the US GDP, leading to broader market uncertainty and a decline in risk appetite.

Against this backdrop, CoinShares’ researcher James Butterfill highlights Bitcoin as the hardest hit by the bearish sentiment, experiencing outflows of $2.59 billion last week. Ethereum also suffered, recording its highest weekly outflows at $300 million. Other major altcoins followed suit, with Solana experiencing outflows of $7.4 million.

Nevertheless, short Bitcoin positions saw minor inflows totaling $2.3 million, suggesting some investors are positioning themselves for further downside.

Despite the overall negative sentiment, some digital assets saw inflows. Sui emerged as the best performer, attracting $15.5 million, while XRP followed with $5 million in inflows. These gains suggest that while the broader market is under pressure, certain projects continue to garner investor interest.

For XRP, the sentiment remains bullish, steered by increasing anticipation of a US SEC (Securities and Exchange Commission) decision on an XRP ETF. The deadline for the SEC to approve or reject certain ETF applications has begun. Investors remain hopeful that XRP will gain regulatory clarity. Including XRP in Trump’s crypto reserve in the US could enhance this sentiment.

Notwithstanding, the latest round of outflows follows a concerning trend developed over the past few months. The previous week saw crypto outflows of $508 million, further exacerbating investor fears. Before that, the Federal Reserve’s hawkish rhetoric and concerning Consumer Price Index (CPI) data had already triggered the first major crypto outflows of 2025, with $415 million exiting the market.

This series led some analysts to point to macroeconomic factors as the primary driver of the selloff, with investor sentiment still showing fear.

However, others argue that external policies like President Donald Trump’s tariffs have contributed to the uncertain market environment, stoking inflation fears and making risk assets like crypto less attractive.

A competing perspective suggests that structural shifts, including cash and carry trading strategies, may contribute to Bitcoin’s recent volatility.

As of this writing, Bitcoin was trading for $93,095, up by over 8% since Monday’s session opened.