Dollar loses reserve currency status: Bitcoin in the eye of the storm after Trump's Davos actions

The exchanges and crypto markets are in turbulent waters. Bitcoin is trading around $78,220, a loss of 0.43% in the past 24 hours, while broader market sentiment is dominated by geopolitical uncertainty and ongoing debates about the future role of the US dollar. What happened in Davos and the subsequent policy statements have brought the issue of monetary imperialism back to the forefront—and the crypto industry is listening intently.

The central question is no longer whether Bitcoin is a safe haven, but whether traditional investors and central banks are changing their minds about who should be the true store of value. Mike Novogratz, CEO of Galaxy Digital, pointed out a crucial moment this week: the gold price suggests that the dollar is visibly losing its role as a global reserve currency. “This is the accelerated loss of reserve currency status by the US dollar,” Novogratz wrote on social media. Yet he also complains that Bitcoin’s performance is disappointing—the market reacts with selling at a time when traditional investors should be looking at alternative stores of value.

Why Bitcoin does not behave as a safe haven

The paradox of this period is alarming. Under normal circumstances, risk-averse investors would flock to Bitcoin as protection against political unrest and monetary devaluation. But these days, Bitcoin is acting as a high-beta risk asset—not as an alternative reserve currency. QCP Capital analysts have sharply pointed this out: “BTC’s momentum struggles to re-establish itself. Instead of acting as a hedge, BTC is trading like a risky stock that reacts strongly to interest rates, geopolitics, and cross-market volatility.”

This behavior reveals a fundamental truth about current markets. The reserve currency function of the dollar is under pressure—gold is rising, Europe is considering independence from US payment systems—but at the same time, political threats (Trump’s tariff discussions, Greenland, Iran) warn all investors to be cautious. Bitcoin is thus being swept along with the general risk aversion, despite its theoretical appeal.

The daily agenda: Market Wide Risk-Off Sentiment

The CoinDesk 20 index fell about 2% in the past 24 hours, reflecting the sell-off felt across all cryptocurrencies Wednesday evening. Ethereum lost 2.06%, Solana and Cardano (ADA) showed more resilience with +0.49% and +1.82%, respectively, while XRP stabilizes around $1.62. Mining-related stocks took the biggest hits—Riot Platforms, Core Scientific, and CleanSpark declined 3-9% due to a combination of lower Bitcoin prices and bond yield pressures.

The cause? Japanese government bonds recovered after earlier heavy selling—this briefly signaled safety and led to a decrease in bond yield pressures. But this relief was fragile. The US 10-year yield remains at 4.285%, and the broader sentiment remains defensive: risk assets like cryptocurrencies, stocks, and speculative positions are retreating as investors reallocate funds to safer havens.

The S&P 500 lost 2.06%, the Nasdaq Composite 2.39%—these are significant declines confirming the global risk-off movement. The E-mini S&P 500 futures show a cautious pre-market rebound of +0.15%, suggesting investors are preparing for a potential recovery but remain cautious.

Where gold goes, the reserve currency demand follows

This is where the reserve currency issue becomes crucial. Gold futures are up 2.18% to $4,869.70—a classic sign that global investors are doubting paper currencies and central bank policies. The weakening dollar (DXY unchanged at 98.67 but under pressure from European appreciation) points in the same direction. Europe and other regions are seeking alternatives, not so much because they want to embrace Bitcoin, but because they see US tariff imperialism as a reason to become less dependent on the dollar.

This scenario should favor Bitcoin. But it does not happen. Why? Because during periods of geopolitical uncertainty with economic consequences, investors primarily seek cash and traditional safe havens—not experimental alternatives. Bitcoin can only function as a reserve currency substitute when macroeconomic confidence is stable. Instability first pushes it down.

Technical levels and outlook for Bitcoin

The key point analysts are watching: resistance at the 50-week exponential moving average (50W EMA) on the weekly Bitcoin/USD chart. BTC was rejected at this level, suggesting the trend is under pressure. The support zone to watch: $88,120. As long as Bitcoin stays above this level, sideways movement can be expected between the EMA price and this support zone.

Without a clear breakout above the 50-week level, market sentiment will likely remain reactive rather than directional. This aligns with QCP’s warning: until policymakers give clearer signals and political uncertainty diminishes, crypto will probably be driven by external factors rather than its own fundamentals. Bitcoin’s attempt to position itself as a reserve currency alternative will have no chance until external pressures subside.

Major crypto companies under pressure

Stocks exposed to crypto activity are all feeling the pain. Coinbase Global (COIN) closed Tuesday at $227.73 with a loss of 5.57%, Galaxy Digital (GLXY) fell 6.44% to $32.10. Mira Holdings (MARA) lost more than 8.71% to $10.37. Also, the so-called “Treasury” companies—those holding substantial Bitcoin on their balance sheets—are taking big hits: MicroStrategy (MSTR) dropped 7.76% to $160.23.

This pattern proves that large investors in crypto equities are reorienting. It is less a vote of no-confidence in Bitcoin’s reserve currency future and more a reaction to households and professionals pulling capital en masse from higher-yielding assets.

ETF flows reveal caution

Spot Bitcoin ETFs see daily net capital outflows of -$479.7 million—a warning sign. Since inception, these ETFs have generated $57.32 billion in inflows, holding about 1.31 million BTC. But recent net outflows indicate institutional investors are reducing their Bitcoin exposure.

Ethereum spot ETFs show a similar pattern: -$230 million daily net outflow, though cumulatively $12.7 billion in inflows. This raises the question: before institutional adoption of Bitcoin as a reserve currency substitute, these institutional players are pulling back when volatility and political uncertainty increase.

What’s next: Policy above sentiment

In the coming days, policy announcements, tariff discussions, and geopolitical moves will determine the market. Solana Seeker (SKR) airdrop claims open on January 21 (already passed), Summer.fi (SUMR) token generation event takes place—but these are all marginal issues in the big picture. The real question is: how long will this risk-off period last, and when will confidence in cryptocurrencies recover?

Until then, the reserve currency position Bitcoin could take—as an alternative if the dollar loses its reserve status—will remain speculative. Investors prefer caution over forward-looking thinking. Bitcoin must first prove again that it is a safe haven before being seriously considered as a reserve currency alternative.

Market overview: Volatility and caution

Bitcoin is currently trading around $78,220 (24h: -0.43%), Ethereum at $2,360 (24h: -2.06%). The break-even ratios in crypto remain under pressure: BTC dominance stands at 59.81%, while the ether-bitcoin ratio drops to 0.03321. The hashrate (seven-day moving average) is at 1,005 EH/s, indicating miners continue despite price pressures.

On a macro level: US 10-year yield at 4.285% (-1bp), Euro Stoxx 50 -0.61%, FTSE -0.12%. Pre-market traders are cautiously anticipating a recovery, but sentiment remains defensive as long as political uncertainty persists and central banks do not clarify their course.

This is the reality of modern crypto markets: not driven by fundamentals or reserve currency status, but by macro sentiment, risk appetite, and political developments. Bitcoin’s role as a reserve currency substitute will have to wait until market conditions become more stable.