- The cryptocurrency market experienced a drop of over 4% following the first White House Crypto Summit.
- Bitcoin’s increasing relationship with stocks and macroeconomic indicators may have obstructed any potential rally.
- David Sacks mentioned that Trump initially pointed to XRP, SOL, and ADA as part of the digital asset inventory due to their status as top five assets.
On Friday, Bitcoin (BTC) struggled to build momentum despite positive speculation surrounding the White House Crypto Summit and the proposed establishment of a Strategic Bitcoin Reserve. Many experts noted that the growing connections between cryptocurrency, macroeconomic conditions, and stock markets could significantly hinder market growth.
Crypto market declines as stock market correlation pressures prices
The cryptocurrency market fell over 4% on Friday, with Bitcoin and several prominent altcoins still unable to bounce back from the recent downturn. Bitcoin dropped below $87K following the first White House Crypto Summit.
This decline occurred despite the enthusiasm surrounding the creation of a Bitcoin Strategic Reserve and expectations of a favorable regulatory landscape for crypto in the United States.
The downturn in the crypto market can be linked to its increasing correlation with the conventional stock market, which has been experiencing a decline since mid-February. According to data from Google Finance, the Nasdaq-100 and S&P 500 have fallen by 9% and 6%, respectively, from their all-time highs on February 19.
“The crypto markets have been tied to traditional financial markets for quite some time. The macroeconomic forces at play are currently so overwhelming that no amount of positive news for crypto is likely to shift the prevailing sentiment,” Eli Cohen, General Counsel at Centrifuge, stated.
Mike Marshall, Head of Research at Amberdata, shared a similar view in a note, indicating that investors are favoring low-risk assets.
“Bitcoin faces pressure due to challenging macroeconomic conditions—inflation remains steady at around 2.5%, 10-year Treasury yields fluctuate between 4.4% and 5%, and the uncertainties regarding tariffs are causing a shift towards safer assets,” wrote Marshall.
Moreover, Mike Cahill, CEO of Douro Labs, expressed in an interview that adverse macroeconomic conditions might make a Bitcoin Strategic Reserve ineffective in stimulating the crypto market.
“Investors must balance their hopes for crypto-friendly policies against their concerns regarding a possible global recession in 2025,” Cahill explained.
“The 30-day correlation between Bitcoin and the S&P 500 frequently exceeds 70%, highlighting a significant connection between these assets. Despite the potential advantages of a strategic reserve, this reserve is unlikely to create immediate buying pressure in the market since Trump has suggested that it would be financed with already confiscated BTC instead of new acquisitions,” Cahill noted.
Additionally, altcoins related to the digital asset reserve, such as Ether (ETH), XRP, and ADA, fell by 3%, 7%, and 9%, respectively, in the past 24 hours.
This followed comments from David Sacks, suggesting that President Trump mentioned XRP, SOL, and ADA as part of the crypto reserve because they rank among the top five assets.
“The president simply mentioned the top five cryptocurrencies by market capitalization, so I believe people are reading too much into this,” Sacks told Bloomberg TV on Friday.
However, Sacks’s remarks faced criticism from members of the crypto community, who pointed out that Ether and BNB actually rank higher than SOL and ADA.
On Thursday, Trump signed an executive order to establish a Bitcoin Strategic Reserve utilizing assets acquired through “criminal or civil asset forfeiture.” The order also includes plans for creating a digital asset stockpile using assets obtained through similar means as that of the Bitcoin Strategic Reserve.