Many analysts were surprised to see Bitcoin acting as a safe-haven asset amid uncertainty caused by Donald Trump’s trade wars. BTC found itself under material pressure at the start of April as investors rushed to sell assets amid global market sell-off. However, Bitcoin has quickly managed to recover and gained more than 25% from its April lows.
Investors were mostly focused on finding protection from trade war uncertainty. Bitcoin enjoyed inflows of money seeking protection from tariffs and central bank policies.
According to Bloomberg, investors poured $2.9 billion into spot Bitcoin ETFs in April, betting on Bitcoin’s rally. It should be noted that spot Bitcoin ETFs saw outflows in February and March. Later, investors showed that they were willing to buy the dip.
Private companies, led by Michael Saylor’s Strategy, also continue to buy BTC at a robust pace. Growing demand from private businesses serves as an additional positive catalyst for Bitcoin.
While the above-mentioned trends have provided significant support to Bitcoin in April, the world’s main cryptocurrency will likely need additional catalysts to rally above the $100,000 level.
The strong recovery in traditional markets, which was triggered by Trump’s decision to pause tariffs for 90 days for most countries, remains fragile.
BTC acted as a safe-haven asset in April, but it maintains some correlation with U.S. stock indices. This is not surprising as spot Bitcoin ETFs are traded on U.S. exchanges. Therefore, these instruments cannot completely ignore general market trends.
Potential support from the Federal Reserve could be the key positive factor that ensures a sustainable rally for Bitcoin. Such support could come in form of rate cuts or quantitative easing (put simply, restarting the printing press to support the economy).
The latest report indicated that U.S. GDP Growth Rate was -0.3% quarter-over-quarter in the first quarter of this year, compared to analyst consensus of +0.3%. In the previous quarter, GDP Growth Rate was +2.4%, so the U.S. economy has suffered a significant slowdown due to tariff uncertainty.
Importantly, the negative impact of tariffs was not fully realized in the first quarter, so second-quarter numbers could be even worse unless tariff policy changes or the Fed provides material support.
At this point, the Fed does not have much time to monitor the impact of trade wars as the U.S. economy has already started to slow down. The pressure on Fed Chair Powell will surely intensify, and he will be blamed for the economic slowdown. If the Fed is forced to start a quantitative easing program to support markets and the economy, Bitcoin will have an excellent chance to test all-time high levels.