Bitcoin Outflows Hit Two-Year High Amid U.S. Tariff Uncertainty

Bitcoin's unique characteristics have made it a standout asset, especially in times of economic uncertainty. This was evident when the U.S. government imposed new tariffs on imports, a move that received significant criticism from experts for its potential impact on the global economy. Despite the criticism, the tariffs proved to be an effective tool for influencing other countries, and digital assets, including Bitcoin, benefited from the situation.

Analysts have criticized the financial implications of the import duties imposed by the U.S. President. Some believe that the situation underscores Bitcoin's unique economic properties in the face of global instability. The 90-day pause on raising reciprocal duties, with a return to a baseline of 10 percent for most countries except China, exposed vulnerabilities in the U.S. government bond market. Economist and author of The Bitcoin Standard, Saifiddin Ammus, suggested that the reversal of higher duties was likely a reaction to rising bond yields, highlighting the forced nature of such a decision.

Trump's administration initially seemed to have a successful strategy, with a severe stock market decline presented as an acceptable price for fiscal sustainability. However, as bonds began to collapse, it became clear how destructive the duties were and how mistaken it was to think that a deliberate stock market crash would support the bond market. The rise in yields was the exact opposite of what the president's administration wanted, leading to a complete reversal of policy just half a day after the duties went into effect. This proved crushing to Trump's negotiating position.

Raul Paul, founder of Global Macro Investor, suggested that the manipulation of duties could have been just a "public relations play" to reach a trade agreement with China. The delays in concluding a trade agreement could slow down the recovery of both stock and cryptocurrency markets, as their dynamics largely depend on the outcome of negotiations. Meanwhile, Bitcoin behaves quite independently amid all economic difficulties, emphasizing its role as a tool of defense against economic instability.

Historically, the dollar was backed by gold and was exchanged for a fixed amount of this precious metal until 1933. In 1971, President Richard Nixon stopped the exchange of the dollar for gold to protect the U.S. gold reserve and stabilize the economy, marking the beginning of the era of fiat currencies. Ammus suggested that the U.S. government should continue buying BTC until it has enough coins to fully cover the dollar money supply, then ostensibly move to a Bitcoin standard.

Despite its positive fundamental traits, the crypto market is starting to repeat its previous patterns. Data from analytics platform CryptoQuant shows that BTC outflows on exchanges have reached a two-year high. Although BTC is trading well above the early 2023 levels, demand for the crypto among exchange users resembles the beginning of a bullish trend. The 100-day moving average (SMA) of net flows on exchanges recently hit its lowest level in two years, which is also an important feature. Analysis of historical patterns suggests that this may indicate that investors are re-accumulating the asset.

The negative value of net flow means that outflows from exchanges exceed inflows, reflecting high demand from users and low willingness to sell BTC through exchanges. At the same time, the total balance of BTC on exchanges is at its lowest level in recent years. CryptoQuant experts note that trading platforms' reserves totaled 2.535 million BTC as of early April, down at least 7 percent from 2.740 million BTC at the beginning of the year. Meanwhile, larger Bitcoin holders continue to build their reserves during April, despite retail investors selling the crypto.

Whales with balances from 1 to 10 thousand BTC have been actively accumulating crypto since March, despite the decline in its price. Every time the price falls, large players buy assets amid panic selling by smaller investors, which is generally a typical situation. Bitcoin has once again confirmed its reputation as an antifragile asset—amid geopolitical instability and shaky U.S. economic policy, it is not just staying afloat but demonstrating steady demand. Outflows from the exchanges, growing interest of major players, and convergence with the image of "digital gold" signal that the market is preparing for a new round of growth. Investors are presumably not done with the bull run.