Why bitcoin is sliding even as global fears rise

Why bitcoin is sliding even as global fears rise

Bitcoin has plunged sharply, falling about 50 percent from its October peak and slipping below $63,000 for the first time in more than a year. For a market known for wild swings, that kind of decline is not shocking. What is surprising is the timing.

Theoretically, bitcoin should have been doing well at this time.

Global tensions are simmering. President Donald Trump has threatened military action against Iran and intensified trade tensions with several countries. At the same time, rapid breakthroughs in artificial intelligence have rattled equity investors, pushing tech shares into bouts of volatility. Gold has risen to record highs above $5,500 an ounce, and traditional fear gauges like the VIX have jumped.

If bitcoin were actually “digital gold,” this kind of climate should have helped it. Instead, it has lost about 20 percent this year, CNN reported.

The digital gold question

For years, crypto advocates argued that bitcoin could act as a store of value in times of crisis, similar to physical gold. The idea was simple: when markets are nervous and currencies wobble, investors would park money in a scarce digital asset outside the traditional financial system.

That theory is now being tested.

Gold has rallied strongly during this period of uncertainty. Bitcoin has not. The widening gap between the two assets has led many investors to rethink whether bitcoin really behaves like a safe haven, or whether it remains closer to a high-risk technology bet.

In recent months, bitcoin has traded more in line with speculative assets than with defensive ones. When investors move into “risk-off” mode and cut exposure to volatile assets, crypto often ends up on the sell list.

The fading Trump bump

Bitcoin had rallied after Trump’s 2024 election win, as he shifted to a more crypto-friendly stance and promised lighter regulation. That post-election surge lifted prices sharply.

But that so-called “Trump bump” has now completely faded.

US Treasury Secretary Scott Bessent added to the pressure this week by telling lawmakers that the Treasury has no authority to step in and stabilize crypto markets. For investors hoping for government backstops similar to those in traditional finance, that was a reminder that crypto remains largely on its own.

At the same time, enthusiasm around bitcoin exchange-traded funds has cooled. Institutional flows have slowed, reducing trading volumes and making prices more sensitive to sharp swings by retail investors.

Not the first crash

For long-time crypto watchers, none of this is entirely new. Bitcoin has endured repeated collapses over the past decade.

After the 2014 hack of the Mt. Gox exchange, prices plunged. In 2018, fears around speculative initial coin offerings sent bitcoin down more than 70 percent. In 2021 and 2022, regulatory pressure and the collapse of the FTX exchange triggered another deep selloff.

Each time, bitcoin eventually recovered, often within 12 to 18 months.

Whether this downturn proves similar will depend on broader market sentiment and whether bitcoin can convincingly establish itself as more than a speculative asset. For now, it is behaving less like digital gold and more like a barometer of investor nerves.