$BTC

Bitcoin in decline Kanchanara/Unsplash

Bitcoin (BTC) and the vast majority of cryptocurrencies are in decline, following the significant risk aversion movement that hit the markets this Monday (7). The escalation of the trade war with the imposition of retaliatory tariffs of 34% by China on imported products from the United States, along with the subsequent threat from US President Donald Trump to impose an additional 50% tax on the Asian country, has brought even more uncertainty to the macroeconomic scenario. The possibility of an increase in global inflation and stagflation in the world's largest economy are the main concerns.

Earlier, Bitcoin was trading at $76,000, reaching its lowest point since November of last year, but the cryptocurrency began to reduce losses throughout the day. Axel Blikstad, co-founder of the B2V management firm, emphasizes that it is important to note how Bitcoin, despite being an asset that historically has higher volatility than American company stocks, is falling less than the seven largest technology companies in the US during the current crisis.

“In essence, what happened is pretty much the same as what occurred at the beginning of the Covid-19 pandemic. When panic hits, investors sell what they have liquidity in, and Bitcoin is traded 24 hours a day, seven days a week,” highlights the manager.

In Blikstad's opinion, an investor who faces a margin call in a leveraged operation and needs to put up more money as collateral typically prioritizes selling assets in which they have a profit or at least smaller losses. Since a significant portion of cryptocurrencies saw gains of up to 100% last year, they end up becoming the perfect assets for this.

Thus, the decline of recent days could be seen as natural and indicate a bottom for Bitcoin, but the manager does not dare to make any projections given the volatility of the scenario. “I think we are close to the floor of Bitcoin, which could drop to $70,000, but I don't believe that.”