Bitcoin Ends Worst First Quarter in a Decade with 11.7% Decline

Bitcoin has just concluded its worst first quarter in a decade, with an 11.7% decline as markets grappled with the new administration’s economic agenda. This performance ranks as the 12th worst out of the past 15 first quarters, according to available data. The significant drop has sparked a familiar question in crypto circles: is the cycle over?

The last time Bitcoin started the year this poorly was in 2015, during a prolonged slump following the 2013 peak and after the collapse of Mt. Gox. Back then, prices recovered modestly over the rest of the year before surging in 2016. In the first quarter of 2020, amidst a market sell-off tied to fears surrounding the COVID-19 pandemic, Bitcoin saw a 9.4% drawdown but then recovered to end the year up over 300%. In other years with negative Q1 returns—like 2014, 2018 and 2022—Bitcoin ended the year down sharply, coinciding with the tail ends of previous bull cycles.

This time around, the backdrop is uncertain. Cryptocurrency prices surged after the U.S. election in November, with the sector gaining greater regulatory clarity under the new administration. However, the recent unveiling of reciprocal tariffs against nearly every country in the world led to a massive U.S. equities market wipeout in just two days. This resulted in the S&P 500 index's lowest level in 11 months and the Nasdaq 100's entry into bear market territory. While Bitcoin has outperformed so far, its future trajectory remains unclear.

Historically, a weak Q1 doesn’t always spell doom for Bitcoin. The asset has bounced back in half of the years when it started in the red. The recent macroeconomic backdrop has seen analysts raise recession odds, which could test Bitcoin’s role as a “U.S. isolation hedge.” The current downturn has raised questions about whether the cycle is nearing its end or if there are further declines ahead. Some analysts believe that the current downturn may be a sign that the cycle is nearing its end, while others are more optimistic and believe that the market will recover in the coming months. According to the analyst's forecast, the current cycle may still have some room to run, but the recent decline has certainly added to the uncertainty.

The decline in Bitcoin's value has also had an impact on the broader cryptocurrency market. Other major cryptocurrencies, such as Ethereum, have also experienced significant declines in value during the first quarter. This has led to a sense of pessimism among investors, who are now questioning the long-term prospects of the cryptocurrency market. The decline has also highlighted the interconnected nature of the market, with the performance of one cryptocurrency often having an impact on the others.

Despite the challenges faced by Bitcoin in the first quarter, some investors remain optimistic about the long-term prospects of the cryptocurrency. They point to the growing adoption of Bitcoin by institutional investors and the increasing acceptance of cryptocurrencies by mainstream financial institutions as signs that the market is maturing. Additionally, the recent decline in value may present an opportunity for investors to buy Bitcoin at a discounted price, which could lead to significant gains in the future.