In an unexpected turn of events, bitcoin, the largest cryptocurrency, emerged as the strongest growth multiplier in April, outshining even the returns delivered by traditionally regarded 'safe-haven' gold.
What's more interesting is that the outperformance of the seemingly volatile crypto came at a time when economic turmoil, triggered by Trump’s 2 April reciprocal tariff announcements, was reaching its peak, sending shockwaves through global financial markets. That means bitcoin outperformed gold in a situation where the safe haven is usually seen as the alternative for respite.
The tech-heavy Nasdaq Composite has recouped its losses from the fallout of the 2 April ‘Liberation Day’ tariff announcements, coming back to pre-tariff levels. On the other side, often considered a ‘safe-haven,’ the US dollar has shed 4% of its value, with investors choosing to favour the yellow metal as a default alternative in uncertain economic times, taking it over 6% higher.
In stark contrast, bitcoin has delivered nearly double the returns given by gold, at 12%, since the start of the month. This trend clearly reflects investors using the cryptocurrency as an alternative hedge bet, largely banked on Trump’s favourable policy plans for the asset.
In April, investors funnelled around $2.9 billion into US-listed bitcoin spot exchange-traded funds, data from Bloomberg showed. This marks a stark turnaround from the preceding months of March and February, which recorded net outflows of $811 million and $3.6 billion, respectively.
Much like other assets, bitcoin also went into a downslide after Trump’s tariff announcements; however, the cryptocurrency was quick to reverse trend and edge higher. Analysts feel the rise in bitcoin prices may be signalling towards a diversification of bets for investors as they look out for protection from growing policy risks, especially after the tussle between Trump and the Federal Reserve came out in the open.
In another move to safeguard themselves and move away from risks associated with US policy shifts, investors also began pouring money out of US assets into other safe-haven currencies like the Japanese yen and Swiss franc, with bitcoin also grabbing part of that reallocation.
In addition, Trump’s pro-crypto stance has also been working in favour of bitcoin, lifting sentiment and positively shaping future expectations. Since his inauguration on 20 January, Trump has made the cryptocurrency sector a clear priority, appointing several pro-crypto figures to key positions. On 7 March, Trump also followed through on a key campaign pledge by setting up a ‘strategic bitcoin reserve’.
Last year, global investment firm Jefferies’ top boss Christopher Wood had shared his expectations of bitcoin surging towards levels of around $150,000, touting it as the right time for investors to book profits off the cryptocurrency. The base case, Wood said, is not to try and trade these positions, most particularly in the pension fund portfolio.
“For those with a more tactical focus, or owning bitcoin on leverage, the view is that $150,000 is a good price level to start taking some profits since the base case is that bitcoin will rally three times in this post-halving cycle, since the trend has been for the capital gains on holding bitcoin to more than halve following each halving cycle,” Wood wrote in a previous weekly note to investors, GREED & FEAR.
The conviction for Wood to hold on to bitcoin was the belief that it will rise to $150,000 levels going ahead, stemming from the fact that Trump had hinted at a change of regulatory policy towards crypto at the Securities and Exchange Commission (SEC).
Having said that, whether or not this rally in bitcoin sustains, only time will tell, as investors await to see if Trump’s policy support for crypto turns into a bite instead of just bark.
