Finimize - 👋 Bye bye, bitcoin

What’s going on here?

Investors pulled $1 billion out of bitcoin exchange-traded funds (ETFs) on Tuesday in the biggest single-day recoil ever.

What does this mean?

It wasn’t just a one-time thing: over the past week, investors have removed $2.1 billion from bitcoin ETFs. That’s elbowed the OG crypto down to its lowest price since November’s rally started. Now, the crypto market is hardly immune to dramatic swings: it’s famous for them. But this one doesn’t look like a quick blip. Investors are all running in one direction – away – rather than seizing the opportunity to scoop up some bitcoin at a cheaper price. Unless that changes and folk start to “buy the dip”, the crypto could stay on the slide.

Why should I care?

For markets: We’ll always have November.

Bitcoin’s post-election rally was built on the belief that this administration would be kind to digital currencies, with some dubbing the new US leader “the first bitcoin president”. But any crypto-friendly changes have been overshadowed by threats of heavy tariffs, undermining investors’ confidence in the broader economy and international relationships. After that sent the first droves toward the door, many newer investors – less accustomed to crypto’s mood swings – followed their lead. At the same time, hedge funds dialed back on “basis trades”: a strategy where traders bank the difference between a futures contract and its underlying asset by buying one and selling the other. But when the gap between the two shrank, that became less lucrative – so hedge funds opted to shed their bitcoin ETF stashes, stat.

Zooming out: Safety is sexy.

This isn’t just a bitcoin issue: investors have been turned off by all sorts of risky assets. They’ve ditched “leveraged” ETFs – which use debt or contracts to amplify price movements – tied to the likes of Tesla and Nvidia, as well as Cathie Wood’s tech-heavy ARKK fund. Instead, they stuffed nearly $7 billion into more traditional stock ETFs this week – specifically, S&P 500 and Nasdaq ones.

What’s going on here?

The US president announced plans for 25% tariffs on European imports, which could give the region an all-American pummeling.

What does this mean?

The president didn’t mince words at his first cabinet meeting, saying the European Union was “formed to screw the United States” – the region sells a lot more stuff to the country than it buys. So, determined to balance the exchange of goods, he announced plans to implement 25% tariffs on European “cars and all other things”. Investors latched onto the more specific starting point, selling shares in Europe’s carmakers. The president went softer on his neighbors, though: he now won’t implement levies on Canadian and Mexican goods until April, pushing back the already-delayed start date of next week.

Why should I care?

Zooming out: Talk about a high shipping fee.

The president didn’t spare China. Fed up with seeing American exports set sail on Chinese ships, he wants to give shipbuilders from the US of A a bigger share of the sea. The reported tactic: charge fees of up to $1.5 million every time a Chinese-made ship docks at a US port. That would impact shipping companies all over the world and their everyday customers, with those increased costs likely to be passed down the supply chain.

The bigger picture: It’s a two-way street.

Europe pledged retaliation against any “unjustified” tariffs. That could mean higher fees for everything from machinery to pharmaceuticals and cars, so American shoppers could soon be paying more for the same stuff. Add that to the potential fallout from taxes on Chinese boats, and inflation could tip back into the danger zone. No wonder the Federal Reserve is keeping interest rates lofty: the central bank will want to keep the downward pressure on prices, rather than relaxing too soon and pulling a one-eighty later.