Bitcoin’s Role in Finance Is Changing – Here’s Why

Bitcoin’s reputation as a hedge against economic turmoil is fading as it moves in step with traditional risk assets.

Since Trump’s return to office, nearly $1 trillion has vanished from the crypto market, signaling a shift in investor perception.

Once seen as digital gold, Bitcoin no longer mirrors the metal’s gains. While gold continues to rise, Bitcoin has struggled, with analysts noting a sharp drop in market value despite Trump’s pro-crypto stance.

Its increasing correlation with traditional markets is a key factor—once independent, Bitcoin now moves in sync with the Nasdaq and S&P 500, though this link has weakened slightly in recent months.

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Liquidity concerns add to the uncertainty. Capital is flowing back into the US dollar, leaving Bitcoin and other cryptocurrencies vulnerable to sudden crashes. ETF holdings have shrunk by $20 billion, and DeFi’s total locked value has plunged, reflecting declining confidence in crypto’s stability.

Geopolitical tensions are amplifying market volatility. A growing number of investors see trade wars as the biggest threat to risk assets in 2025, and only a small fraction still believe Bitcoin would thrive under such conditions. Meanwhile, volatility indexes are spiking, with analysts warning of continued price swings.

Despite the downturn, some believe Bitcoin could play a role in stabilizing the US economy. Advocates argue it offers an alternative to traditional finance, while corporations exploring Bitcoin holdings could fuel long-term demand.

Even skeptics admit Bitcoin functions as digital gold, though its ability to serve as a true financial hedge remains uncertain. Whether it rebounds or continues behaving like a high-risk asset will depend on how investors adapt to shifting economic conditions.

Alexander Zdravkov