What happened in just three months to drive Bitcoin down from $109K to $82K? Was it merely inflation reports, or is there something more significant at play?
Bitcoin’s Coldest Q1 in Seven Years
Just three months ago, the crypto landscape was brimming with excitement. Bitcoin (BTC) had soared to over $109,000, Ethereum (ETH) was robust, and a wave of optimism swept through the market, boosted by Donald Trump’s pro-crypto stance upon returning to the presidency. Yet, as we conclude Q1 2025, that initial enthusiasm has faded, giving way to doubt.
As of March 31, Bitcoin is trading at approximately $82,000, reflecting a nearly 13% decline in the quarter. This performance signifies its weakest Q1 in seven years, halting a two-year streak of solid gains during the same period.
For context, Bitcoin enjoyed a remarkable 72% increase in Q1 2023 and followed that with another 69% rise in Q1 2024. The last instance of such a sharp first-quarter drop occurred in 2018, when it fell nearly 50% in the aftermath of the ICO boom.
In contrast, Ethereum is experiencing an even more significant downturn. The second-largest cryptocurrency by market capitalization has plummeted 46.4% this quarter, currently trading near $1,800. This mirrors its 46.6% decline in Q1 2018, marking its worst performance for the first quarter in seven years.
However, a broader perspective reveals a more complex situation. From 2017 to 2025, Bitcoin has finished Q1 in negative territory four out of nine times, while Ethereum has seen three losing Q1s during that time frame.
This particular downturn is noteworthy given the challenging climate—persistent inflation, wavering investor confidence, and escalating geopolitical tensions.
The key question now is—was this merely a seasonal dip, or an indication of more serious challenges ahead? Might we see a recovery as the macro conditions become more favorable for crypto? Let’s delve deeper.
Understanding the Crypto Slide
On March 28, the crypto market suffered a significant jolt after the U.S. released its February core Personal Consumption Expenditures (PCE) index—a crucial inflation indicator keenly monitored by the Federal Reserve.
The year-over-year increase registered at 2.8%, slightly above the anticipated 2.7%, enough to rattle investors.
In contrast to headline inflation, core PCE excludes volatile food and energy prices, giving a clearer picture of persistent inflationary trends. This clearer outlook suggested that inflation pressures were not easing as swiftly as the market had hoped.
This inflation surprise coincided with rising concerns about global trade, exacerbated by President Trump’s tough tariff approaches which ushered in a new wave of macroeconomic tension.
The situation began in early February with a 25% tariff threat aimed at Canadian and Mexican goods, followed promptly by a sweeping 20% tariff on all Chinese imports, driven by accusations of Beijing’s involvement in fentanyl trafficking.
Multiple sectors, from steel and aluminum to automobiles and even Venezuelan oil, have faced scrutiny. The administration has identified approximately 15 nations—dubbed the “Dirty 15″—that might soon experience reciprocal tariffs due to trade imbalances and geopolitical disputes.
The global backlash was swift. China retaliated with tariffs on American agricultural exports, the EU is preparing a multi-phase duty plan affecting around $28 billion in U.S. products, while Canada announced CAD $60 billion in retaliatory tariffs, with Mexico reportedly finalizing its measures for early April.
Unsurprisingly, markets reacted negatively to the uncertainty. Both the S&P 500 and NASDAQ 100 dropped over 2% on the day the PCE data was revealed, erasing more than $1 trillion in combined market capitalization.
The crypto market followed suit amidst this risk-off sentiment. As investor anxiety heightened, assets like ETH, Ripple (XRP), Solana (SOL), and other altcoins reversed their upward momentum, while Bitcoin faced mounting pressure due to unfavorable macro conditions.
According to data, most recent sell-offs have originated from short-term holders—those who entered the Bitcoin market within the past five months and are reacting to price fluctuations.
Conversely, Long-Term Holders—investors who have held for over 155 days—are still in profit and appear to be the primary contributors to the current profit-taking trends.
With long-term inflation expectations now soaring to 4.1%—the highest since 1993—many traders have opted for a more defensive approach, reallocating assets into cash. Just three months earlier, before the tariffs were enacted, these expectations were closer to 2.6%.
What Consumer Confidence Indicates for Crypto’s Next Steps
The latest data from the Conference Board reveals that U.S. consumer sentiment continued its downward trend in March. The Consumer Confidence Index, released on March 25, declined for the fourth straight month, settling at 92.9.
More worrying, however, was the significant drop in the Expectations Index, which plummeted by 9.6 points to 65.2—marking its lowest level since 2013, and well below the 80-point threshold typically viewed as a recession warning sign.
The Expectations Index reflects how households perceive future income, business dynamics, and job opportunities. A drop to this level implies a recalibration of outlooks among consumers. As expectations decline, risk-taking behavior similarly shifts.
This growing caution is becoming evident in the markets. Only 37.4% of survey respondents believe stock prices will rise in the next year—a notable 10-point reduction from February and the steepest monthly decline in over a year.
At the same time, optimism regarding employment has diminished. The segment of consumers expecting more jobs has dropped from 18.8% to 16.7%, while those predicting fewer jobs increased to 28.5%.
This atmosphere does not favor high-risk investments. With inflation remaining elevated and global trade uncertainties escalating, investors are hesitating—crypto being among the first markets to feel this impact. Risk appetite is dwindling, and funds are shifting to safer, more conservative options.
Additional Declines on the Horizon?
As Q1 concludes on a low note for both crypto and traditional markets, the crucial question remains: what lies ahead?
Across the board, signs of fatigue are apparent. U.S. equities are particularly signaling broader weaknesses. “S&P 500 futures have officially entered correction territory,” highlighted market observers, noting that a staggering $2.7 trillion in market cap was wiped out in just four trading days.
Meanwhile, the Nasdaq 100 is perilously close, remaining only 5.5% above bear market territory. This is significant, as Bitcoin has displayed increasing correlation with tech-heavy, risk-sensitive assets. When the Nasdaq stumbles, crypto often follows.
Even sizable institutional acquisitions are failing to reverse the trend. MicroStrategy’s recent investment—$1.92 billion in Bitcoin, acquiring over 22,000 BTC—did not halt the decline.
“Saylor just added 22,048 BTC…but Bitcoin still ended the week lower,” pointed out a market analyst, emphasizing the persistent macro resistance impacting the market.
Looking at longer-term trends, additional caution flags are being raised. Gold’s relative strength compared to Bitcoin has been steadily increasing.
For the first time in over a decade, the GOLD/BTC ratio has successfully broken out of a 12-year downward trend, raising questions about how crypto is being repriced amidst growing macroeconomic uncertainty.
Gold, positioned as a traditional safe-haven asset, seems to be regaining interest, potentially diverting funds from more volatile assets like Bitcoin and Ethereum.
Ethereum, in particular, is facing heightened scrutiny. A technical analyst remarked on its price structure as quite troubling: “A massively disastrous chart for ETH,” indicating a local bottom for Ethereum could align with gold’s recent upswing.
Economic forecasts are also reflecting caution. Recently, a renowned financial institution increased its U.S. recession probability to 35%, up from 20%, citing concerns that tariffs and tightened financial conditions could restrain growth more than previously assessed.
Nevertheless, a potential shift might be on the horizon. An economist believes that some of the worst-case scenarios may already be factored into the market.
He points out that financial conditions typically affect markets with a delay of 10 to 12 weeks, and Q1’s volatility likely stems from policy tightening seen in Q4 2024.
Supporting this perspective, the recent declines in the U.S. dollar, bond yields, and one-year inflation breakevens suggest that markets may be moving past their peak stress.
“There may still be a near-term fluctuation or a final dip into the April 2 tariff announcement,” he noted, further suggesting that the trajectory following that may trend upwards, especially if macro data improves and liquidity begins to flow more freely.
If macro conditions stabilize, inflation expectations decrease, and financial liquidity increases, crypto could rebound due to revived risk appetite.
However, if the tariff conflict intensifies or recession fears escalate, the market may remain under strain, especially with a significant number of short-term holders still actively trading and responding to market movements.
Caution remains crucial in the current environment. The market is experiencing a phase where positive catalysts take time to influence price movements, and confidence is slow to rebuild. Make investments wisely and only commit funds you can afford to lose.
Disclosure: This article is not intended as investment advice. The content provided here is for educational purposes only.