From digital gold to risk asset: Bitcoin plummets amid tariff carnage and investor fears

7 Apr 2025

As global markets recoiled from the US tariff carnage, Bitcoin investors were, no doubt, frozen in dismay as the cryptocurrency plummeted, wiping out weeks of gains in mere hours.

Don’t panic. The immediate catalyst for Bitcoin’s nosedive was always clear: Trump’s tariff announcement sent shock waves through global markets, with investors fearing the spectre of a full-blown trade war and potential global recession. As institutional investors pulled funds from both US and global markets, cryptocurrencies were not spared the bloodbath.

We can also blame this market anxiety on hedge fund billionaire Bill Ackman’s call for a 90-day pause on the planned tariff implementation, warning of “dire economic consequences” and deepening crypto market crash concerns.

Bitcoin has always been a long game, but its movement is currently aligned with the stock market, and the losses in US equities have contributed to the cryptocurrency’s decline.

Fears of a broader stock market crash, with some drawing comparisons to the “Black Monday” event of 1987, have further intensified the negative sentiment with the Fear and Greed Index plunging to 23 from last week’s 34 reflecting the sell-off.

The drop in Bitcoin’s price also triggered long liquidations, as traders who had bet on an increase were forced to sell to cover losses.

Not all that glitters is digital gold

Watcher.guru quoted Tracy Jin, chief operating officer of MEXC Exchange, saying that the market is currently “easily manipulated”, raising concerns about further disappointments and questioning Bitcoin's status as a safe haven asset.

As Trump’s administration confirmed on Sunday that the sweeping tariffs — including the punishing 54% levies on Chinese imports — would remain in place “for days and weeks”, gold markets experienced their own volatility. Traders liquidated long positions to cover losses in equity markets, even as central banks continued their bullion buying spree.

The People’s Bank of China added gold to its reserves for a fifth consecutive month in March, riding the wave of rising global trade tensions. This continued accumulation by central banks represents a fundamental divergence from Bitcoin markets, which remain dominated by private investors and institutions rather than sovereign entities — excluding, of course, Trump’s strategic reserve vibes.

Bottom line: Bitcoin, despite its “digital gold” narrative, still behaves more like a risk asset during acute market stress events, with investors liquidating positions to cover margin calls elsewhere.

Electric money

While most financial coverage focuses exclusively on Bitcoin’s dollar price, a growing school of thought argues that we should instead be examining its relationship with something far more fundamental: energy.

When Satoshi Nakamoto mined the first Bitcoin, there wasn’t a dollar exchange rate. Bitcoin-to-kilowatt was actually the original exchange mechanism.

This perspective reframes Bitcoin not merely as a speculative asset, but as what some analysts call a “unit of energy account” — a way to store and transfer value derived directly from electrical power.

When Bitcoin falls below production cost for a significant percentage of miners, they’re forced to either shut down or sell reserves, creating supply constraints that eventually push prices back up.

Unlike gold, whose mining costs have remained relatively stable in recent years, Bitcoin’s production economics undergo regular shifts through its programmed halving events, which reduce mining rewards by 50% approximately every four years. The most recent halving in early 2024 fundamentally altered the cost basis for producers.

What does this say about Bitcoin?

Global market jitters, sparked by Trump’s tariffs and fears of a trade war, triggered a broad sell-off that included Bitcoin. Bitcoin, despite its “digital gold” narrative, currently behaves more like a risk asset and is susceptible to wider economic anxieties.

Bitcoin’s price drop was worsened by traders betting on price increases being forced to sell. Leveraged positions in the volatile crypto market can amplify price swings during periods of market stress.

There is a resource-based value for Bitcoin, where its price floor could be tied to miners’ production costs. This offers a longer-term fundamental value proposition beyond market sentiment.

Beyond the dollar paradigm

As de-dollarisation trends continue — with the US dollar’s share of global reserves gradually declining — a cautiously optimistic view suggests that Bitcoin’s energy relationship could become more significant than its dollar price.

Gold, meanwhile, continues to benefit from its role in the post-dollar international order. With China’s Commerce Ministry announcing additional 34% tariffs on all US imports in direct retaliation to Trump’s policies, the yuan-gold relationship gains importance in potential new trade settlement mechanisms.

Also, don’t discount the biggest market trend when telling the Bitcoin story. Artificial intelligence is booming.

As AI systems consume ever-increasing amounts of computational power, some experts speculate that Bitcoin could emerge as a natural medium of exchange for these systems.

Gold continues its millennia-long role as the anchor of sovereign wealth, while Bitcoin emerges as something entirely new — a digital commodity whose value is ultimately derived from, and constrained by, the laws of thermodynamics rather than central bank policy. DM

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Business Maverick

Not all that glitters is digital gold

Electric money

What does this say about Bitcoin?

Beyond the dollar paradigm