Donald Trump’s Trade War Puts Safe Havens to the Test, as Gold Soars and Bitcoin Stumbles

Key Takeaways

• The massive slump in BTC’s price and gold’s continuous bullish performance have brought the haven debate back into focus.
• Experts believe the investor fear triggered by the global trade war is a key reason, but this does not signal the end of Bitcoin’s bull run.
• Gold continues to post all-time highs, despite the traditional market experiencing a significant downturn.

Donald Trump’s trade war has reignited the safe havens debate. Gold continues to soar to new highs, while Bitcoin (BTC) has retraced 28% from its all-time high.

In recent weeks, the Trump administration has announced numerous tariffs on multiple countries, set to take effect from March 4.

Bitcoin Struggles, Gold Shines

At a time when Bitcoin’s price has touched new multi-month lows, gold continues to hit new highs, despite an industry-wide market downturn, reaffirming its status as a safe haven with a bang.

On the other hand, the BTC price appears to be in a correction phase after hitting a new all-time high in January, following Trump’s inauguration. 

Bitcoin’s price has plunged below $80,000, the lowest since November. Bitcoin ETFs saw $2.43 billion in outflows in the first three days of this week, and the fallout from the Bybit hack continues to unfold.

The most surprising factor that has called BTC’s haven claims into question is the fact that the current price decline is not driven by any significant catastrophic or black swan event. Instead, it is primarily due to BTC’s association with Trump and his trade war, which has caused a massive downturn in the traditional stock market and created uncertainty and fear among investors.

As a result, liquidity has dried up in the Bitcoin market, leading to significant outflows from institutional Bitcoin investment products.

Experts predict that Bitcoin’s next price target is around the $70,000 level, which is seen as a strong support zone. However, this level will only be reached if negative sentiment continues to dominate the equity markets. U.S. stock indices have remained in the red for several consecutive days.

Revisiting COVID-Era Market Movements

The 2021 COVID era saw a similar price action trend in Bitcoin and gold. Initially, Bitcoin experienced a major correction due to investor panic, while the gold price soared. As government-induced liquidity flooded the market through allowances to the general public, the new liquidity flowed into Bitcoin, driving it to new highs.

Market analysts and pundits believe BTC is nearing its bottom, having filled the CME gaps between $78,000 and $80,000. Many see this as a potential bottom signal.

Tracy Jin, COO of the MEXC crypto exchange, said that the recent market has concentratedly released risks and negative factors, which is beneficial for the subsequent market trend. Jin added that the current drawdown process is a healthy risk release within a bull market:

“After the initial adjustments in altcoins and BTC, U.S. stocks are also expected to undergo adjustments. If the Federal Reserve’s rate cuts are substantial enough, there is still hope for a considerable market opportunity this year. Medium to long-term investors can consider buying the dip, but they should closely monitor key support levels and changes in macroeconomic policy.”

The Trump administration is also expected to announce another series of pro-crypto regulatory decisions. Proposals for a strategic national Bitcoin reserve remain on the table, and a decision could catalyze the next leg of the Bitcoin bull run. Conversely, gold may continue its bullish trends, unless geopolitical tensions and trade wars cool down.