Bitcoin has fallen from its post-election highs, with the cryptocurrency on track to end the first quarter of 2025 in the red. From the start of 2025, Bitcoin witnessed a shaky trend, weighed down by speculation that the Fed may have limited scope for further interest rate cuts. Bitcoin is down about 7% so far this year (as of March 26, 2025).

What Led to the Slump? 

Federal Reserve Pause and Trump’s Policies

Investor sentiment shifted on the likelihood of a prolonged pause in Fed rate changes due to uncertainty related to inflation. Concerns also emerged over the potential inflationary impacts of President Donald Trump’s tariffs and immigration policies.

Underwhelming Government Move?

Bitcoin, which skyrocketed following Trump’s election win on hopes of a reserve, found the actual government move underwhelming. In early March, there was an executive order by President Donald Trump to establish a strategic Bitcoin reserve for the United States.

The reserve will be funded using Bitcoin seized in criminal and civil forfeiture cases, with no plans for the U.S. government to purchase additional Bitcoin at this time. Investors were disappointed that the government did not introduce a more aggressive Bitcoin acquisition program.

Long-Term Bullish Outlook?

Despite the market’s negative reaction to Bitcoin in the first quarter, some investors believe that the government move is bullish for the long term. Matt Hougan, CIO at Bitwise Asset Management, told CNBC’s Squawk Box Asia that the market may be misinterpreting the announcement. The market is short-term disappointed that the government didn’t say it was immediately going to acquire 100,000 or 200,000 Bitcoin, per Hougan.

Potential Future Accumulation

White House Crypto and AI Czar David Sacks hinted at possible future Bitcoin acquisitions, stating that the U.S. government would explore budget-neutral strategies that impose no extra costs on taxpayers. However, any additional purchases beyond seized assets would require further executive or legislative action.

Is Bitcoin a Digital Gold?

Fed Chair Jerome Powell recently equated the cryptocurrency Bitcoin to gold rather than the U.S. dollar, stating, “People use Bitcoin as a speculative asset. It’s like gold — it’s just virtual and digital.” Interestingly, BlackRock’s spot Bitcoin-based ETF iShares Bitcoin Trust IBIT (launched earlier in 2024) now has more than $48 billion in net assets. That’s more than BlackRock’s iShares Gold Trust IAU ETF, which debuted in 2005 and has $41.1 billion in assets (read: Is Bitcoin the Digital Gold? ETFs in Focus).

Short-Term Setback or Long-Term Opportunity?

Hougan described the recent price drop as a temporary setback, predicting that the market will soon recognize the long-term bullish implications of the U.S. strategic reserve. However, we believe that investors should remain cautious about investing in Bitcoin, as we are yet to gain more clarity on the Bitcoin acquisition plan.

Moreover, trade tensions persist, and it remains to be seen which direction Trump’s tariff war will ultimately take. We suggest that investors remain on the sidelines.

Safe Bitcoin ETFs for Risk-Averse Investors

Issuers have introduced various tools to make a high-risk asset like Bitcoin more accessible and appealing to risk-averse investors. Calamos has launched a suite of Bitcoin buffer ETFs: Bitcoin Structured Alt Protection ETF – January (CBOJ Quick QuoteCBOJ - Free Report) , Bitcoin 90 Series Structured Alt Protection ETF – January (CBXJ Quick QuoteCBXJ - Free Report) and Bitcoin 80 Series Structured Alt Protection ETF – January (CBTJ Quick QuoteCBTJ - Free Report) .

Innovator also launched the Uncapped Bitcoin 20 Floor ETF - Quarterly (QBF Quick QuoteQBF - Free Report) , the first ETF offering uncapped exposure to Bitcoin’s upside potential while simultaneously capping downside losses. These products offer some downside protection amid extreme volatility.

(We are reissuing this article to correct a mistake. The original article, issued on March 27, 2025, should no longer be relied upon.)