Over the past few days, the price of Bitcoin has been going through a very unstable phase. After dropping below thresholds considered important by investors, the value of the leading cryptocurrency quickly collapsed to its lowest level in months. The drop below $70,000 triggered chain sales and dragged down the rest of the cryptocurrency market as well.

This movement does not appear to be related to technical problems with the Bitcoin network or flaws in its functioning. On the contrary, the drop was part of a more general climate of nervousness in the financial markets, especially in the United States. In the same hours that Bitcoin fell, US stock markets also lost ground and the perception of uncertainty about the economic future grew. Once again, Bitcoin reacted more violently than other assets, showing how sensitive it is to moments of global fear.

What is most striking is the context in which this collapse occurred

The hardest phase of the descent coincided with theopening of the US markets and a period of high political tension in the US. This brings a crucial question back to the centre: is Bitcoin really an alternative to the traditional financial system or is it now an internal component of it, reacting to the same fears and crises?

Against this backdrop, we put some questions to Marco Cavicchioli, one of Italy’s leading popularizers on Bitcoin, to try to understand what the political and geopolitical implications of what has happened are and what role Bitcoin can play in an increasingly unstable world.

Bitcoin’s collapse was accentuated just as the US markets opened. Is this not a sign that Bitcoin today is much more closely linked to the United States than is often told?

Yes, correct. The US has been the dominant market for Bitcoin exchanges for some time now, and is therefore also the main player in Bitcoin’s affairs. It is no coincidence that the reference price for Bitcoin is recognised around the world to be that in US dollars, and since it depends primarily on the liquidity in the markets, the dollar plays an absolute leading role in Bitcoin’s price affairs.

You spoke of ‘fear’ as a decisive factor. But does this fear stem mainly from the financial markets or from an increasingly tense political climate in the US?

Certainly it is fear that originates from and permeates the global financial markets, and in particular the US financial markets. Lately, in fact, Bitcoin’s price trend is very much influenced by the fluctuations of the VIX, the so-called ‘fear index’ specific to American financial markets. Personally, I believe that this fear of the American markets is closely linked to Trump’s policies, which is also reflected in the incredible increase in the price of gold from $2,000 to $5,000 over the last two years, and in particular since the start of the Republican primaries in 2024, which Trump himself won.

Bitcoin was born as a response to distrust of states and institutions. Yet as American political uncertainty grows, Bitcoin goes down. Isn’t that a contradiction that is hard to ignore?

By now, the original ideologies out of which Bitcoin was born no longer have anything strictly to do with Bitcoin. Bitcoin started out as a project completely external to global finance, whereas it is now fully integrated. It would be a mistake, however, to consider this a problem.

Bitcoin, like anything else, evolves over time, and in seventeen years it has come a long way. Bitcoin has become a purely financial counterweight to liquidity, not least because it was conceived from the outset as a form of hedge against liquidity excesses. Since its inception in 2009, global liquidity calculated in US dollars has increased threefold in less than twenty years, and it is this that has driven Bitcoin’s enormous growth in value since its inception.

In times of crisis Bitcoin is sold before stocks and other traditional investments. Does this mean that the market still considers it a very speculative asset, rather than a safe haven?

The speculation on Bitcoin is there, but there is also much more. Certainly, however, it is not, and cannot be considered, a safe haven asset, because as they say in technical jargon it is ‘risk-on’. However, it should be emphasised that there are very few assets that are considered risk-off (e.g. gold), and between risk-on assets like Bitcoin and e.g. shares there are different degrees of risk. Bitcoin is considered higher-risk than, for example, the equities of major US companies, but in this respect it is in line with those of other higher-risk companies. In fact, there are many smaller stocks that are undoubtedly to be considered higher risk than Bitcoin. Unfortunately, this is a complex reasoning that is often not understood by non-experts, and there is a tendency to simplify (a little too much) by distinguishing only between speculative and safe haven assets.

If the political situation in the US deteriorates in the coming months, could Bitcoin become a real alternative to the system or risk being swept away along with the rest of the markets?

The key point is liquidity in the financial markets. However, when fear increases on the financial markets, liquidity inevitably decreases (because it is taken out of the financial markets and used for something else). In such a scenario, not only is it inevitable that the price of Bitcoin will fall, it is also exactly what needs to happen. The fact is that there should be no fear in the financial markets if things were going well, and those in government would do well to realise this and take note. The financial markets, with their ‘fear indexes’, are a perfect litmus test of the health of the economy, but rulers often don’t like this, especially when they point to problems caused by their own political choices.

Bitcoin is often referred to as ‘neutral’ and ‘homeless’. But can it really be so if its value reacts so strongly to the internal tensions of the world’s leading power?

A distinction must be made here between theory and practice. In theory, yes, Bitcoin is completely independent of any government or state. In practice, however, the world’s largest financial market, the US, inevitably ends up playing a leading role, and Bitcoin can do no more than adapt to this state of affairs, which is difficult to dispute for the time being.

For many countries outside the West, Bitcoin was presented as a tool to reduce dependence on the dollar. After a crash like this, does this promise remain credible?

No, Bitcoin cannot be an alternative to transactional currencies (i.e. those used for payments). It never has been, and I believe it never will be. Its volatility makes it bad as a transactional currency, which is demonstrated by the considerable effort central banks have to put into it to keep the value of fiat currencies (dollar, euro, etc.) more or less stable.

Its role is a different one, namely to act as a counterweight to the enormous amount of fiat currency liquidity that has been issued and is continuously being injected into the markets by central banks and commercial banks, in the latter case in the form of credit. However, in this role it acts as a unique instrument in the world, along with gold, with one more characteristic, however, than gold: volatility. Many believe, mistakenly, that Bitcoin’s price volatility is a flaw, and instead it should be considered as perhaps its most successful feature.

In conclusion, does this episode only tell of a normal market phase or does it tell us something deeper about the link between Bitcoin and the crisis of confidence in the global economic and political order?

For Bitcoin, this is a relatively normal market phase (let’s say not a particularly anomaly). For the financial markets as a whole, on the other hand, the current moment is an anomaly the size of a house, and probably even an epochal one. Cyclone Trump is pouring tons of fear into the markets, which (almost) all of us would have happily done without, while China seems to be preparing to deal the US dollar a historic blow with the aim of replacing it with the yuan as the global reference currency. Bitcoin watches, reacts, and survives.