Shares of the iShares Bitcoin Trust ETF (IBIT -2.39%) fell 17% in February, according to data from S&P Global Market Intelligence. The BlackRock exchange-traded fund essentially tracks the price of Bitcoin.
Like most assets considered risky, the Bitcoin ETF plunged in February, as investors grew skittish over the economy. Those fears were prompted by plunging consumer-sentiment readings, as President Trump threatened tariffs on several countries and large-scale federal layoffs led to fears of an upcoming recession.
Bitcoin is no safe haven, at least not yet
Bitcoin evangelists have touted its possibilities as a store of value in the event other currencies lose value due to inflation. However, as has been the case in recent market history, the cryptocurrency has really behaved more like a volatile technology stock.
In 2022, when inflation shot up, one might have thought Bitcoin would remain resilient as a hedge, as some had believed it would. However, the price actually plunged, just like many other stocks in various sectors, before recovering.
The crypto also entered February near all-time highs just over $100,000, with a big bump coming after the November election. President Trump had promised to de-regulate the cryptocurrency industry and make America the “Bitcoin capital of the world.” He had also vowed to create a Strategic Bitcoin Reserve.
However, the digital token, like many stocks that shot up in the aftermath of the election, soon fell back to earth, as economic uncertainty erased the post-election bump. Tariff fears emerged throughout February, as the administration announced a one-month delay on tariffs on Mexico, Canada, and China set for Feb. 1.
Through February, the prospect of tariffs and federal layoffs under the Department of Government Efficiency program ramped up as the deadline drew near, causing several highly negative consumer sentiment readings. The threatened tariffs actually did go into effect on March 4, although on Thursday, the administration soon carved out another one-month delay for certain goods covered under the 2020 U.S.-Mexico-Canada trade agreement.
All the uncertainty combined to make investors fear an economic downturn in late February, and therefore flee risk assets, Bitcoin included.
Where does Bitcoin go from here?
It appears Trump is at least making good on one of his promises: to create a Strategic Bitcoin Reserve, or at least in part. On Thursday, David Sacks, the administration’s “crypto czar,” announced that the president had signed an executive order creating the strategic reserve. However, it won’t be funded via new purchases by the government but will rather be formed by retaining the roughly 200,000 bitcoins the government had already seized in criminal and civil proceedings.
Sacks pointed out that the government had previously sold off $366 million of seized Bitcoin, and those holdings would have been worth $17 billion today had the government held on to them. He also said the executive order allows for the Treasury and Commerce departments to buy additional Bitcoin in “budget-neutral ways,” which likely means without directly using taxpayer funds.
Bitcoin evangelists may have been expecting more following the election, as many likely hoped the government would actually purchase the cryptocurrency on a regular basis, increasing market demand. Notably, it remained near its year-to-date lows, even after Sacks’ announcement.
