Bitcoin’s value drops sharply amidst market turmoil. Will it survive the impact of trade conflicts?

Bitcoin saw a decline below $80,000 amid the current financial market turmoil. However, experts in the cryptocurrency realm suggest that Bitcoin might display more resilience compared to traditional asset classes if global trade tensions escalate further.

The digital currency was trading at $79,000 during Monday afternoon, slightly dropping from its morning value but starting to recover from earlier losses. Year-to-date, Bitcoin is down approximately 15%. Bitcoin operates as a decentralized form of currency, distinct from government-controlled fiat currencies like the U.S. dollar or Swiss franc.

Following the November election, the prices of many cryptocurrencies surged after former President Donald Trump vowed to reduce regulations and form a strategic Bitcoin reserve. Trump even introduced a meme coin shortly before his inauguration in January. Matthew Sigel, VanEck’s Head of Digital Assets Research, which manages assets totaling $113.8 billion across various cryptocurrency funds, noted that since the election, traditional stocks have decreased while Bitcoin has experienced an upward trajectory. This suggests that the White House’s efforts to restructure global trade might be favoring Bitcoin and the overall cryptocurrency market.

Although Bitcoin was originally conceived as an alternative investment, it has exhibited a correlation with riskier assets like stocks. As market turbulence persists, Bitcoin prices have also fallen. However, this decline has been slightly offset by a broader trend where global markets are losing confidence in the U.S. dollar, historically regarded as the world’s primary currency. Austin Campbell, a professor at NYU’s Stern School of Business, pointed out that amidst the current uncertainty, there isn’t a single dominant currency that investors are gravitating towards. Consequently, individuals are turning to neutral assets such as gold and Bitcoin as stores of value, continuing the historical legacy of these assets spanning thousands of years. Furthermore, aspirationally, Bitcoin is increasingly perceived as a modern store of value.

In conclusion, while Bitcoin is not immune to the volatility gripping traditional markets, its sustained resilience suggests that it may weather the storm better than other asset classes in the event of prolonged global trade instability. As investors and institutions navigate the evolving financial landscape, Bitcoin’s distinctive characteristics continue to position it as a unique and appealing asset class for the future.