Bitcoin’s recent downturn has drawn parallels to the market chaos of 2020, as an analyst from CoinShares posits that the cryptocurrency may be mimicking a historical pattern of crash and recovery.
Investor sentiments have shifted, echoing the tumultuous period surrounding the COVID-19 outbreak, with geopolitical tensions now being exacerbated by the imposition of tariffs between the U.S. and China. This has produced an unsettling sense of familiarity among veteran traders.
BREAKING: China just imposed an additional 84% tariff on US goods. This is going to kill many US Farmers’ businesses. This is going to harm US pharmaceutical companies, aircraft manufacturers, and multiple other hardworking Americans. pic.twitter.com/rIVyfGAAsM
— Ed Krassenstein (@EdKrassen) April 9, 2025
The CoinShares analyst suggests that despite the increasing macroeconomic difficulties and bearish indicators, the current decline might parallel the circumstances of 2020, where a significant market correction was followed by a strong resurgence driven by shifts in monetary policy and renewed investor confidence.
The recent market volatility has been stark, spurred by President Trump’s latest tariffs, which have unsettled global trade and pushed volatility indices to peaks not seen since the depths of the COVID-19 crash.
In an unexpected turn, oil prices have plummeted to five-year lows despite expectations of a supply squeeze. Concurrently, Bitcoin has seen a 30% decline from its January highs, with net ETF inflows down by 10% from peak levels. The mempool has also been largely cleared, indicating a lack of on-chain activity to bolster bullish sentiment.
Source: Cryptonews
Despite these challenges, the analyst maintains a cautiously optimistic viewpoint, highlighting significant historical correlations and the broader economic cycle as indicators that Bitcoin might be positioning itself for another breakout year.
Tariffs, Tantrums, and the Specter of 2020
The current economic climate bears striking resemblances to the pre-COVID environment of 2019 and early 2020, according to the analyst.
During that time, Bitcoin had just emerged from a euphoric rally triggered by hopes of an ETF approval in 2019, which has been rekindled with recent actual ETF authorizements in late 2024. However, both rallies succumbed to growing global economic worries.
In 2020, this anxiety was fueled by recession fears, yield curve inversions, and issues in the repo market. Today’s concerns include renewed trade tensions, enduring inflationary pressures, and potential sovereign debt crises.
Back in 2020, Bitcoin was trading around $10,000, having risen from the depths of the 2018 bear market. Similar to the current situation, that rally was largely driven by sentiment rather than solid fundamentals.
Now, we find ourselves at a pivotal moment, with speculative ambitions surrounding Bitcoin reaching around $100,000, driven by ETF optimism and aspirations of a national Bitcoin reserve under Trump’s administration. However, this enthusiasm has since faded.
The analyst notes that critical on-chain indicators, such as UTXO bands, are signaling caution, which adds to the prevailing bearish outlook.
Source: CoinShare Report
The reversal of the green active band alongside the increase of the short-HODL light blue band typically signals the onset of bearish trends.
Nonetheless, the analyst points out an intriguing anomaly; a similar pattern was observed in 2020 right before a false downturn led to a subsequent surge in the market.
Printing Press Primed as Tariff Chaos Spreads
Although the current tariff threats may seem overblown and poorly targeted at non-sovereign entities, their potential ramifications could be significant.
The CoinShares analyst posits that this may reflect a typical negotiation strategy employed by Trump aimed at securing more reasonable agreements from trade partners. However, the interim consequences could be profound and far-reaching.
As uncertainty in trade dampens investor sentiment, equity markets are facing precarious conditions. The S&P 500 has nearly experienced its worst three-day performance since 1987, underscoring the fraying investor confidence.
The S&P 500 has now erased all gains since March of 2022. The last 3 years didn’t happen. pic.twitter.com/30Ne1XcmQT
— BonkDaCarnivore (@BonkDaCarnivore) April 8, 2025
The implications for Bitcoin are twofold. While macroeconomic fears have driven down crypto markets, these same pressures could prompt central banks to reassess their policies, much like what transpired in 2020.
The analyst contends that the U.S. is on an unsustainable trajectory, with debt-to-GDP ratios soaring to levels that maintaining current interest rates could trigger a fiscal crisis.
While the challenges today are distinct in scale and nature from those faced during the COVID crisis, the underlying dynamics share remarkable similarities. A macroeconomic shock has diminished Bitcoin from speculative heights, but the factors that facilitated its impressive recovery in 2020 could re-emerge.
Historical trends suggest that the next course may be a sharp rebound, particularly as fiscal and monetary policies once again adapt to a fragile global landscape.
Arthur Hayes has also indicated that Bitcoin may soon find its opportunity amid this turmoil.
@CryptoHayes suggests China’s yuan devaluation amid trade tensions could spark capital flight into Bitcoin, reviving its role as a safe haven during economic uncertainty.#Bitcoin #Cryptohttps://t.co/ckhiVqj72F
— Cryptonews.com (@cryptonews) April 8, 2025
The post Bitcoin Could Mirror 2020 Crash-and-Rebound Pattern, CoinShares Analyst Warns appeared first on Cryptonews.
