This month, the cryptocurrency market has faced mounting challenges, continuing a downslide that began in the last quarter of the previous year.
Bitcoin (BTC) has fallen from its all-time peak of $109,300 in January to $82,000, while Ethereum (ETH) has dropped from $4,100 in November to $1,800.
Other altcoins have also experienced declines, with major players like Solana (SOL), Cardano (ADA), and Polkadot (DOT) seeing double-digit losses from their highest points in 2024.
Cryptocurrencies have largely mirrored movements in the U.S. stock market, which is currently undergoing a correction. The tech-dominated Nasdaq 100 index saw a decline of 350 points on Monday, reaching its lowest mark since September.
In a similar vein, the Russell 2000, S&P 500, and Dow Jones have all recorded double-digit drops from their peaks earlier this year.
Conversely, gold prices have soared this year, achieving their highest level at $3,120 after five consecutive weeks of gains. This marks a rise of over 20% this year, with significant inflows into major gold ETFs like GLD and IAUM.
Gold is regarded as a more reliable safe haven than cryptocurrencies
The persistent rise in gold prices, coupled with the downturn in both stock and cryptocurrency values, indicates that investors now see gold as a more reliable safe-haven asset amidst growing uncertainties.
With the looming Donald Trump’s Liberation Day tariffs viewed as a potential black swan event, many investors fear a recession could be on the horizon.
Recently, Trump has revealed extensive tariffs, including a 25% tax on imported vehicles to the U.S. and similar tariffs on products from Canada and Mexico.
His Liberation Day strategy is set to impose reciprocal tariffs on most nations engaged in trade with the U.S., aiming to stimulate domestic investment and alleviate the trade deficit.
Nevertheless, these tariffs can function like taxes, which may suppress consumer spending and push the U.S. economy into a recession.
On a brighter note, a recession might compel the Federal Reserve to cut interest rates and engage in quantitative easing, which could revive interest in risk assets like stocks and cryptocurrencies.
Additively, Trump is banking on the Mar-a-Lago Accord, designed to weaken the U.S. dollar in order to enhance the competitiveness of American goods abroad. A depreciated dollar could benefit gold, cryptocurrencies, and stocks significantly.