Cryptocurrency prices extended their slide on Monday (Mar 10) as escalating tariff war tensions and diminishing prospects of further Federal Reserve rate cuts offset a wave of pro-crypto announcements from President Donald Trump last week.
Risk assets like crypto have been under pressure since the US Fed signalled a pause in rate cuts in mid-December. Adding to the uncertainty, Friday’s labour data showed US unemployment stood at 4.1 per cent, up from 4 per cent last month.
Bitcoin fell as much as 3.7 per cent early on Monday and later pared some of its losses to trade at US$82,568 as of 11.30 in London.
“A large spike in ‘underemployment’ to five year highs has added fuel to recession fears and driven yields lower as rate cuts were pushed forward into early summer,” said Augustine Fan, a partner at crypto derivatives software provider SignalPlus.
Trump’s crypto-friendly stance, including an executive order to create a US Bitcoin reserve and a separate stockpile of other tokens, along with a high-profile summit with industry executives in Washington, has done little to lift market sentiment. While the administration pledged to capitalise the reserve with crypto seized in legal proceedings, the absence of fresh capital commitments disappointed investors.
“The market perceived the summit as underwhelming and top cryptocurrencies dropped after it was revealed that the widely anticipated crypto reserve would only hold existing government holdings,” said Jeff Mei, chief operating officer at crypto exchange BTSE.
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The US currently owns about US$17 billion worth of Bitcoin and about US$400 million worth of several other tokens, largely attributable to asset forfeitures related to civil and criminal cases.
Investors are rationally more bullish on crypto given recent developments like the reduced US Securities and Exchange Commission enforcement, but other factors are more nuanced or even negative, said Ari Paul, co-founder of BlockTower Capital.
“The apparent capricious favouritism in the administration’s selection of assets for the strategic reserve – especially after the launching of Trump and Melania coins – is a strong deterrent to investors,” Paul said in a message. “It’s created the impression that the Trump administration is engaged in lobbying based selection and promotion of ‘insider’ assets, and that the cryptocurrency market today is largely a short-term trading casino,” he added.
Since February investors have withdrawn a net US$4.4 billion from the group of US Bitcoin ETFs, which played a key role in the token’s record run last year. The largest cryptoasset is currently down 25 per cent from its record high of US$109,241 and the broader crypto market has lost over a trillion US dollar in market capitalisation from its peak, according to CoinGecko.
“Bitcoin could very well drop to the US$70,000-to-US$80,000 range in the coming weeks. Only when this tariff war ends and the Fed resumes cutting rates will top cryptocurrencies resume trending towards previous all-time highs,” Mei added. BLOOMBERG
