What changed in just three months to push Bitcoin from $109K to $82K? Was it just inflation data, or is something bigger happening behind the scenes?
Bitcoin’s coldest Q1 in 7 years
Just three months ago, the atmosphere in the crypto market was electric. Bitcoin (BTC) had surged past $109,000, Ethereum (ETH) was holding strong, and a fresh wave of optimism swept through the space, buoyed by the return of pro-crypto Donald Trump to the White House. But as we close out Q1 2025, that optimism has quietly faded into uncertainty.
As of Mar. 31, Bitcoin is trading around $82,000, marking a nearly 13% drop for the quarter. It’s on track to register its weakest Q1 performance in seven years, ending a two-year run of solid first-quarter gains.
To put that into perspective, Bitcoin jumped 72% in Q1 2023 and climbed another 69% in Q1 2024. The last time it faltered this badly in the first quarter was in 2018, when it plunged nearly 50% during the fallout of the ICO boom.
Ethereum, however, is facing a much steeper decline. The second-largest cryptocurrency by market cap has lost a staggering 46.4% this quarter, now trading near $1,800. That’s nearly identical to its 46.6% drop in Q1 2018, making this its worst first-quarter performance in seven years.
Yet when we zoom out, a more nuanced picture begins to emerge. Between 2017 and 2025, Bitcoin has ended Q1 in the red four times out of nine, while Ethereum has seen three losing Q1s in the same stretch.
What makes this particular downturn stand out is the broader backdrop: persistent inflation, fragile investor confidence, and intensifying geopolitical risks.
So the question now is — was this just a seasonal slip, or a sign of deeper trouble ahead? Could prices rebound as the macro environment shifts in crypto’s favor? Let’s take a closer look.
Decoding the crypto slide
On Mar. 28, the crypto market took a sharp hit after the U.S. released February’s core Personal Consumption Expenditures (PCE) index — a key inflation metric closely monitored by the Federal Reserve.
The year-over-year increase came in at 2.8%, slightly above the expected 2.7%, but just enough to unsettle investors.
Unlike headline inflation, core PCE strips out the noise of food and energy prices, offering a clearer view of persistent pricing trends. And that clear view revealed that inflation isn’t cooling as quickly as markets had hoped.
This inflation surprise landed just as concerns over global trade were heating up. President Donald Trump’s hardline tariff strategy has introduced a fresh wave of macroeconomic tension.
It began in early February with a 25% tariff threat targeting Canadian and Mexican goods. That was quickly followed by a sweeping 20% tariff on all Chinese imports, driven by allegations of Beijing’s role in fentanyl trafficking.
From steel and aluminum to automobiles and even Venezuelan oil, few sectors have been spared. The administration has released a list of around 15 countries — labeled the “Dirty 15” — that could soon face reciprocal tariffs based on imbalances and geopolitical friction.
The global pushback has been fast and forceful. China responded with tariffs on American agricultural exports. The EU is preparing a multi-phase duty plan covering roughly $28 billion in U.S. goods. Canada hit back with CAD $60 billion in retaliatory duties, while Mexico is said to be finalizing its own measures for early April.
Markets, unsurprisingly, didn’t take the uncertainty well. Both the S&P 500 and NASDAQ 100 dropped over 2% the day the PCE data was released, wiping out more than $1 trillion in market cap between them.
Crypto was pulled down in the broader risk-off move. As investor nerves frayed, assets like ETH, Ripple (XRP), Solana (SOL), and other altcoins shed their recent gains, while Bitcoin struggled under intensifying macro pressure.
According to Glassnode, most of the recent sales have come from short-term holders — those who have bought Bitcoin within the past five months and are now reacting to price swings.
Meanwhile, Long-Term Holders — investors holding for more than 155 days — remain in profit and appear to be the main source of the current profit-taking activity.
With long-term inflation expectations now spiking to 4.1% — their highest level since 1993 — many traders have shifted to a defensive stance, moving capital into cash. Just three months ago, before the tariff rollout, those expectations were closer to 2.6%.
What consumer confidence says about crypto’s next moves
According to the Conference Board, U.S. consumer sentiment continued its downward slide in March. The Consumer Confidence Index, released on March 25, fell for the fourth consecutive month, landing at 92.9.
More concerning, however, was the drop in the Expectations Index, which plunged 9.6 points to 65.2. That’s its lowest reading since 2013 and far below the 80-point threshold that’s often seen as a warning sign of an impending recession.
The Expectations Index gauges how households view income, business conditions, and job prospects in the coming months. A drop to these levels suggests people are recalibrating their outlook. And when expectations dim, risk behavior tends to shift just as quickly.
That growing caution is starting to appear in markets. Only 37.4% of survey participants now believe stock prices will rise over the next year — a sharp 10-point decline from February and the steepest monthly drop in more than a year.
At the same time, optimism about jobs is fading. The percentage of consumers expecting more jobs fell from 18.8% to 16.7%, while those anticipating fewer jobs climbed to 28.5%.
It’s a climate that doesn’t support risk-heavy bets. With inflation still running hot and global trade uncertainty on the rise, investors are pulling back — and crypto is among the first to feel the pressure. Risk appetite is cooling, and capital is starting to shift toward safer, more defensive plays.
Further declines ahead?
As Q1 draws to a close on a downbeat note for both crypto and traditional markets, the big question now is what comes next?
Across the board, we’re seeing signs of fatigue. U.S. equities, in particular, are flashing broader weakness. “S&P 500 futures officially entered correction territory,” noted The Kobeissi Letter, highlighting that more than $2.7 trillion in market cap was erased over just four trading sessions.
The Nasdaq 100, meanwhile, is teetering just 5.5% above official bear market levels. That’s significant because crypto, especially Bitcoin, has grown increasingly correlated with tech-heavy, risk-on assets. When the Nasdaq falters, crypto often follows suit.
Even major institutional buys aren’t reversing the trend. MicroStrategy’s latest move — purchasing $1.92 billion worth of Bitcoin and adding over 22,000 BTC to its holdings failed to stem the slide.
“Saylor just added 22,048 BTC… but Bitcoin still closed the week in red,” observed CryptoQuant analyst Maartunn, pointing to the strength of macro headwinds weighing on the market.
Looking at longer-term trends, more caution lights are flashing. Gold’s relative strength versus Bitcoin has been climbing steadily.
For the first time in over a decade, the GOLD/BTC ratio has broken out of a 12-year downtrend, prompting questions about how crypto is being repriced amid growing macro uncertainty.
As a traditional safe-haven, gold appears to be attracting renewed interest, potentially drawing capital away from riskier assets like Bitcoin and Ethereum.
Ethereum, in particular, is under added pressure. Technical analyst Michaël van de Poppe described its price structure as deeply concerning: “A massively disastrous chart for ETH,” he noted, suggesting Ethereum’s local bottom may coincide with gold’s recent strength.
Economic forecasts are also leaning cautious. Goldman Sachs recently raised its U.S. recession probability to 35%, up from 20%, driven by concerns that tariffs and tighter financial conditions could hamper growth more than expected.
Still, a possible shift may be underway. Julien Bittel, head of macro research at Global Macro Investor, believes some of the worst-case scenarios may already be priced in.
He explains that financial conditions tend to hit markets with a lag of 10 to 12 weeks, and the current Q1 volatility likely stems from the policy tightening seen in Q4 2024.
Supporting that view, recent declines in the U.S. dollar, bond yields, and one-year inflation breakevens hint that markets may be moving beyond peak stress.
“There may still be a near-term chop or a final dip into the April 2 tariff announcement,” Bittel added, “but the path of least resistance after that feels higher.” He sees April as a potential turning point, particularly if macro data improves and liquidity begins to ease.
If macro conditions stabilize, inflation expectations retreat, and financial liquidity returns, crypto could benefit from a rebound in risk appetite.
But if the tariff standoff worsens or recession fears deepen, the market may stay under pressure, especially with a high number of short-term holders still active and reactive.
Still, caution remains warranted. The market is in a phase where positive catalysts need time to translate into price action, and confidence is slow to return. Trade wisely and never invest more than you can afford to lose.
Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.
