Bit, once seen as a hedge against financial instability, is now facing a major challenge in maintaining this role amid the volatile global economic landscape. The trajectory of the Bit market is increasingly resembling that of traditional risky assets.
Since Donald Trump took office on January 20, the crypto market has witnessed a sharp decline, leading to the loss of nearly $1 trillion in value.
Previously, Bit was considered a financial "hedge", moving in tandem with gold during periods of instability. However, this trend has reversed since President Trump took office. While gold continues to rise in price, Bit has undergone a significant correction, indicating a fundamental shift in how the market perceives this asset.
"According to data from the time Trump took office on January 20, the crypto market capitalization has dropped from $3.7 trillion to $2.5 trillion. This is surprising, as that time marked a local peak for cryptocurrencies, despite Trump being the most crypto-friendly president to date," said Symbiote analyst in a statement.
A key factor in this shift is the increasing correlation of Bit with traditional financial assets. In 2024, BTC moved in sync with the Nasdaq 100 and S&P 500 about 88% of the time, which is completely at odds with its previous role as an asset negatively correlated with these indices.
Currently, the 30-day correlation has dropped to around 40%. This suggests that Bit is now trading more like a high-risk technology stock than an inflation hedge or a tool to mitigate economic instability.
Liquidation is also a major concern. Since 2020, the financial market has seen a decline in liquidity, a trend that has had a profound impact on cryptocurrencies. Analysts point out that liquidity is flowing back into the US dollar, which is considered the safest asset in trade wars.
This change has led to a series of consecutive collapses in the cryptocurrency market, increasing volatility and uncertainty. Data from Coinglass shows that the Assets Under Management (AUM) of the Bit ETF has decreased from $120 billion to $100 billion over the past several weeks.
Additionally, the DeFi market has also been affected. Data from defillama shows that the Total Value Locked (TVL) in DeFi has decreased from a peak of $128.7 billion in 2025 to $93.2 billion at the current time. This decline reflects investors' loss of confidence in the ability of cryptocurrencies to provide financial stability during periods of economic instability.
A recent survey by Bank of America shows an increasing concern about global trade wars. Specifically, 42% of survey participants believe this is the most negative factor for risky assets in 2025, up from 30% in January.
"When asked which global development would have the most negative impact on risky assets in 2025, 42% said global trade wars, mainly due to new tariff threats from the Trump administration. This concern has increased significantly from 30% in January."
Notably, only 3% of respondents believe that Bit will perform well in a comprehensive trade war, which is completely at odds with gold and the US dollar. These findings emphasize the significant shift in market perception - Bit is no longer seen as a hedge during periods of economic instability.
Cryptocurrencies, which were expected to thrive in the context of geopolitical instability, are now considered too volatile to effectively protect against financial shocks.
Additionally, the Goldman Sachs Panic and Volatility Index has risen sharply from 1.4 in December to over 9.1, reflecting the expectation of greater volatility in the future. Kobeissi Letter, a reputable financial source, believes that Bit's price action may continue to be chaotic as concerns about trade wars escalate.
Despite the current pessimistic sentiment, some experts still believe that Bit has long-term potential. Bit could play a crucial role in maintaining financial stability for the United States amid rising public debt. By incorporating digital assets as part of a comprehensive economic strategy, the US could leverage the decentralized nature of Bit to maintain financial strength.
"You can buy Bit as a way to send a clear message and even help rescue the US economy in the long run. This could be a return to the gold standard," shared Brian Armstrong, CEO of Coinbase.
Additionally, Bit's ability to provide liquidity for struggling businesses remains a notable strength. Increasingly, companies are turning to Bit as an alternative asset to boost stock efficiency.
"We have a strong core business, but the current scale is not yet large enough to have a significant impact on the capital market. I believe that as we increase our investment in the Bit treasury strategy, this will help increase the liquidity of our stock and attract more investors," shared Jonathan Ferrari, CEO of Goodfood.
If the trend of corporate Bit adoption continues to grow, it could regain its status as a critical financial tool, rather than just a risky asset. However, it is undeniable that the role of Bit in the global financial system is changing.
"I understand why many people hold Bit as part of their asset reserve. Although I don't agree, I understand that. Just as we have gold reserves, Bit can be considered digital gold, and even superior to gold," shared Bit critic Peter Schiff recently.
Disclaimer: This article is for informational purposes only and not investment advice. Investors should do their own research before making decisions. We are not responsible for your investment decisions.
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