Analysts have warned that the crypto market could face increased volatility ahead as key macroeconomic developments are driving a risk-off sentiment among investors.
The crypto market shed $500 billion in a day
According to The Kobeissi Letter, the crypto market has shed over $500 billion in the last 24 hours—around $100 billion less than its value before U.S. President Donald Trump’s weekend announcement of a strategic crypto reserve, which would consist of a basket of crypto assets, with Bitcoin and Ethereum as core holdings.
Analysts at The Kobeissi Letter pointed out that after Trump’s announcement on reserve plans, the global crypto market surged from $2.7 trillion to $3.1 trillion in just 10 hours. But within a day, all those gains vanished, dragging the market even lower to $2.6 trillion.
The sharp reversal, according to analysts, was a “colossal retail trap” that hit bullish traders hard, as crypto funds saw a record $2.6 billion outflow in late February—about $500 million more than the previous record in 2024.
Bitcoin (BTC) took a hit, dropping 3% below its pre-announcement level and shedding nearly $250 billion in market cap over the past 12 hours, while Ethereum (ETH) slid to $2,002, down 8% from its earlier rebound.
Besides the crypto market, the S&P 500 index fell nearly 5%, while tech stocks like Nvidia also tanked.
Crypto no longer a safe haven
On the evening of March 3, Trump announced that the U.S. would slap a 25% tariff on Canada and Mexico starting March 4, shutting down any hope for a last-minute deal to ease trade tensions. In response, both countries have promised to hit back.
Tensions escalated further after China retaliated by raising tariffs on key U.S. imports by 10-15%, just as a 20% tariff on Chinese imports set to take effect the same day.
“The real driver here is the GLOBAL move towards the risk-off trade. As trade war tensions rise and economic policy uncertainty broadens, ALL risky assets are falling,” The Kobesi Letter wrote in an X post.
According to analysts, investors have lost their confidence in Bitcoin as a safe haven asset, and investors are instead opting for Gold.
Since Jan. 1, the price of Gold has increased by 10%, while the price of BTC dipped nearly 10% over the same period.
“Crypto is no longer viewed as a safe haven play,” analysts added.
More volatility ahead
Analysts warn that crypto could face “even wilder swings” in the coming weeks.
Notably, Goldman Sachs’ volatility panic index has surged from 1.4 in December to 9.1 last Friday, now nearing 10—levels last seen during previous major market shocks. According to Kobeissi analysts, this spike signals that extreme volatility is becoming the new norm.
Further, a Bank of America survey cited by them suggests that investors aren’t expecting Bitcoin to hold up well in the months ahead. Only 3% of respondents believe BTC would perform best in a full-scale trade war. In contrast, 58% view Gold as the top safe-haven asset for 2025.
However, Matt Mena, Crypto Research Strategist at 21Shares, suggested in comments to crypto.news that the market reaction to the tariffs may have been an overreaction.
According to him, “many investors had anticipated these moves” and expect to see some degree of stabilization when trading resumes.
“Despite the short-term volatility, the long-term outlook for the crypto sector remains bright,” Mena told crypto.news, adding that “broader structural trends favoring institutional adoption,” remain intact.
