Analysts are warning that the cryptocurrency market may face heightened volatility in the coming weeks, as a series of macroeconomic developments stoke a risk-off sentiment among investors. The crypto market shed more than $500 billion in just 24 hours, and experts are forecasting even wilder swings in the future as global tensions continue to weigh heavily on investor confidence.
A $500 Billion Loss in 24 Hours
According to The Kobeissi Letter, the total market capitalization of cryptocurrencies plummeted by over $500 billion within a single day. This loss follows U.S. President Donald Trump’s recent announcement about creating a strategic U.S. crypto reserve, which would hold a basket of cryptocurrencies, with Bitcoin and Ethereum as core assets. At its peak, the crypto market surged from $2.7 trillion to $3.1 trillion in just 10 hours after the announcement. However, this brief rally was short-lived, and the market quickly reversed course, dropping back to $2.6 trillion.
The sharp decline is being described as a “colossal retail trap” that caught bullish traders off guard. In fact, crypto funds experienced a record $2.6 billion in outflows in late February, marking a $500 million increase over the previous record set in 2024.
Bitcoin and Ethereum Take Major Hits
Bitcoin, the largest cryptocurrency by market cap, saw its value drop by more than 3% from its pre-announcement level, wiping out nearly $250 billion in market cap over just 12 hours. Similarly, Ethereum slid by 8%, falling to $2,002, down from its earlier rebound.
The crypto market’s downturn comes amid broader market sell-offs, with the S&P 500 falling nearly 5% and tech stocks, including Nvidia, taking a major hit.
Escalating Global Trade Tensions
The sharp drop in crypto prices coincides with a series of macroeconomic events that are contributing to an overall sense of uncertainty in global markets. On March 3, President Trump announced a 25% tariff on Canada and Mexico, escalating trade tensions. Both countries have vowed to retaliate, while China has raised tariffs on key U.S. imports by 10-15% in response to the U.S. tariffs.
This has created a “risk-off” environment, as investors move away from risky assets, including cryptocurrencies, in favor of safer bets. According to The Kobeissi Letter, the global shift toward risk-off trading is the key driver behind the sell-off in crypto markets. Analysts also note that economic policy uncertainty, especially in the context of a potential trade war, is fueling fears and contributing to a broader market decline.
Bitcoin No Longer a Safe Haven
In the face of these market conditions, analysts believe that Bitcoin is no longer being viewed as a safe haven asset. As investors flee to traditional safe-haven assets like gold, Bitcoin’s price has been under pressure. Since the beginning of the year, gold prices have risen by 10%, while Bitcoin has fallen by nearly 10%.
“The crypto market is no longer viewed as a safe-haven play,” analysts at The Kobeissi Letter noted. In contrast to Bitcoin’s struggles, gold is now seen as the top asset for investors seeking protection from global instability.
More Volatility on the Horizon
Looking ahead, analysts are warning that even more volatility is likely. Goldman Sachs’ Volatility Panic Index, which tracks market anxiety, has surged from 1.4 in December to 9.1 as of last Friday, nearing the 10-level—last seen during previous major market shocks. According to The Kobeissi Letter, this surge in volatility is signaling that extreme price swings are becoming the new normal in global financial markets.
Additionally, a Bank of America survey cited by analysts shows that a significant majority of investors no longer see Bitcoin as a viable safe-haven asset. Just 3% of respondents believe Bitcoin would perform well during a full-scale trade war, while 58% of respondents view gold as the top safe-haven asset for 2025.
A Silver Lining?
Despite the ongoing turbulence in the crypto market, some analysts remain optimistic about the long-term outlook. Matt Mena, Crypto Research Strategist at 21Shares, told crypto.news that the market reaction to the recent tariffs may have been an overreaction. “Many investors had anticipated these moves, and we expect to see some degree of stabilization as trading resumes,” he said.
Mena added that the broader structural trends favoring institutional adoption of cryptocurrencies remain intact. “Despite the short-term volatility, the long-term outlook for the crypto sector remains bright,” he concluded.
Conclusion
As the crypto market continues to grapple with a combination of macroeconomic factors, including trade tensions and growing concerns about economic instability, analysts warn that further volatility is likely. With investor sentiment shifting away from riskier assets like Bitcoin and toward safer havens such as gold, the coming weeks could bring even more turbulence for the crypto market. However, some remain hopeful that long-term trends in crypto adoption will prevail, despite short-term challenges.
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