Bitcoin’s Unique Stability Amidst Tariff Announcements
In the wake of President Donald Trump’s Liberation Day tariff announcement, Bitcoin (BTC) stood out in the financial landscape by diverging from the trajectory of most other risk assets. Unlike U.S. and international stock markets, Bitcoin showed remarkable stability over the weekend, poised to maintain its significant support levels near $82,000.
Resilience in the Cryptocurrency Market
The broader cryptocurrency market echoed Bitcoin’s resilience despite experiencing a substantial decline in market capitalization. The overall digital asset market saw a drop of $400 billion, descending from $2.75 trillion at the time of the tariff announcement to $2.35 trillion at the latest data collection. This reduction happened primarily through two sharp declines.
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Initially, digital asset values plummeted by around $150 billion between Thursday, April 3, and Friday, April 4. Following this, the market stabilized throughout the weekend, only to resume its downward path on Sunday.
Significant Drop in Market Valuation
The most dramatic decline transpired between the afternoon of April 6 and the early hours of Monday, April 7. During this brief period, cryptocurrencies lost nearly $300 billion in value, falling from a relatively stable $2.63 trillion to $2.35 trillion, according to data obtained from TradingView by Finbold.
Bitcoin Leads the Crypto Market Downturn
Bitcoin led this downward spiral, breaking below the $80,000 mark for the first time in several months. By Monday, BTC was trading at $75,383, reflecting a 9.67% drop for the day.
Market Dynamics and Correlation with Risk Assets
This downturn can be understood as part of the increasing correlation between digital assets and other risk assets, such as stocks. The recent plunge was largely a reaction to President Trump’s tariffs, with anticipation that many countries will impose their own retaliatory tariffs in the coming days.
Growing Correlation Between Cryptocurrencies and Stocks
The link between cryptocurrencies and stock markets has become more apparent since the summer of 2024. During this period, BTC experienced a decline coinciding with the unwinding of the yen carry trade, coupled with several external economic disruptions, including the tech sector’s DeepSeek-induced sell-off and initial tariff announcements.
Influence of Exchange-Traded Funds
The growing resemblance between stocks and cryptocurrencies can partly be attributed to the approval of spot Bitcoin and Ethereum (ETH) exchange-traded funds (ETFs). These ETFs have introduced a multitude of traditional investors to blockchain-based assets, potentially contributing to the synchronization of movements between these asset classes.
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