Author: Marcel Pechman, CoinTelegraph; Compiled by: Baishui, Golden Finance

Although Bitcoin rose 2.2% on April 1, BTC has not traded more than $89,000 since March 7. While recent price weakness is often associated with escalating global trade wars led by the United States, multiple factors have affected investor sentiment long before President Donald Trump announced tariffs.

Some market participants claim that Strategy has purchased $5.25 billion worth of Bitcoin since February, the main reason why BTC stays above the $80,000 support level. But whoever is buying, the reality is that Bitcoin has shown limited room for gains before President Trump announced a 10% import tariff on January 21.

Gold/USD (left) vs Bitcoin/USD (right). Source: TradingView / Cointelegraph

On February 19, 30 days after the trade war broke out, the S&P 500 hit an all-time high, while Bitcoin has failed to maintain its $100,000 multiple times in the past three months. While the trade war certainly impacts investors’ risk appetite, strong evidence suggests that Bitcoin’s price weakness began long before President Trump took office on January 20.

Spot Bitcoin ETF inflows, strategic Bitcoin reserve expectations and inflation trends

Another data point that weakens the relationship with tariffs is the Spot Bitcoin Exchange Trading Fund (ETF), which has net inflows of $2.75 billion in the three weeks after January 21. As of February 18, the United States has announced plans to impose tariffs on imported products from Canada and Mexico, while the EU and the European Union have taken retaliation measures. Essentially, even if the trade war escalates, the institutional demand for Bitcoin remains.

The disappointment of Bitcoin traders after January 21 stems in part from excessive expectations for the campaign promise of “strategic Bitcoin reserves” mentioned by President Trump at the July 2024 Bitcoin Conference. As investors become impatient, their frustration peaked when the actual executive order was issued on March 6.

A key factor in Bitcoin’s difficulty in breaking $89,000 is the inflation trend, reflecting the relatively successful strategy of global central banks. In February, the U.S. personal consumption expenditure (PCE) price index rose 2.5% year-on-year, while the eurozone consumer price index (CPI) rose 2.2% in March.

After weak employment market data, investors become more risk aversion

2022In the second half of the year, Bitcoin’s rally was driven by inflation that surged to more than 5%, indicating that businesses and households turned to cryptocurrencies as a means of hedging currency depreciation. However, if inflation remains relatively controllable in 2025, lower interest rates will benefit the real estate and stock markets more directly than Bitcoin, as lower financing costs will boost these industries.

U.S. CPI inflation rate (left) vs. U.S. 2-year Treasury yield (right). Source: TradingView

Software job markets have also curbed traders' demand for risky assets, including Bitcoin. In February, the U.S. Department of Labor reported that job openings were close to their lowest levels in four years. Similarly, the U.S. 2-year Treasury yield fell to a six-month low, and investors accepted a modest return of 3.88% to support the security of the instrument. These data indicate that the growing risk-haven options are unfavorable to Bitcoin.

After all, the weakness in Bitcoin prices stems from investors' unrealistic expectations of the U.S. Treasury acquisition of BTC, a drop in inflation to support potential interest rate cuts, and a more risk-averse macroeconomic environment created by investors' turn to short-term bonds. Although the trade war has had a negative impact, Bitcoin has shown signs of weakness before it began.