Less than three weeks into Trump’s presidency, his assertive policies have already caused a significant shake-up in the cryptocurrency market, resulting in an 8.29% reduction in its overall value. While the market initially appeared unaffected by a recent rate increase, the key question remains – how sustainable is this trend?
The upcoming year, 2025, seems poised to be a pivotal period, testing Bitcoin’s reputation as a “safe haven” asset to its limits.
The Escalating Pressure on High-Risk Investments
The long-standing U.S.-China trade conflict, though nothing new, has started to have a substantial impact. Analysts had foreseen this economic shift even before Trump’s presidency, and it is now coming to pass.
Bitcoin has experienced a drop of more than 6% in its market dominance, resulting in the loss of trillions of dollars. Investors are now opting for more conservative approaches. How so?
Gold (XAU) has witnessed a remarkable weekly surge of over 3%, reaching an unprecedented peak of above $2,880 per ounce.
Simultaneously, the U.S. dollar index has also seen a surge, surpassing 109. The introduction of a 10% tariff on goods imported from China has bolstered the index, as concerns regarding a potential interest rate hike have driven investors towards bonds for safer profits.
Despite a U.S. inflation report that fell below expectations, preventing the Federal Reserve from increasing rates, the rising cost of imported goods from Canada, Mexico, and China poses a threat of inflation growth. This situation might deter the Fed from decreasing rates in the near future.
All eyes are now on the upcoming Consumer Price Index (CPI) report for January. A rise in the CPI could trigger another widespread market upheaval, potentially sending Bitcoin’s value plummeting below $90,000.
Is Bitcoin Ready to Withstand the Current Market Pressures?
Ponder Trump’s first presidential term. The U.S.-China trade tensions escalated significantly, with his “Make in America” initiative gaining significant momentum.
Back in 2018, when Trump initiated cuts on taxes for Chinese imports, Bitcoin faced a substantial blow, witnessing a 72% decline and closing the year at $3,740.
However, a silver lining emerges: U.S. imports from China have decreased by 8% since then, now constituting only 13.5% of total imports.
Furthermore, over the past seven years, Bitcoin’s reputation as a “safe haven” asset has progressively strengthened.
While Bitcoin still lags behind Gold in both market capitalization and investor confidence, a double-digit loss seems improbable at this juncture. Even without a rate reduction to surmount resistance levels, institutional funding stands ready to endure the prevailing pressures.
Nevertheless, the risk associated with investing in cryptocurrency assets has notably heightened, rendering a potential rate hike a significant determinant for high-cap investments.
Given the stakes involved, closely monitoring the U.S. economic calendar has become more vital than ever.