Bitcoin Falls Below $77,000 Amid Trump's Recession Comments
The leading cryptocurrency fell below $77,000 overnight but then recovered to $80,800. Investors are worried about a possible recession and Donald Trump’s new tariff policy.
1-day BTC/USDT chart. Source: Cryptovizor
Correlation with Traditional Financial Markets
The American stock market also showed a significant drop on Monday. The Dow Jones index closed down 2.08%, while the broader S&P 500 lost 2.7%, both recording their worst days of the year to date. The tech-heavy Nasdaq Composite fell 4%, marking the largest one-day drop since September 2022, according to CNN.
"Trump's careless remark that a market collapse is 'normal' and that he does not rule out a recession due to tariff uncertainty has further alarmed investors, intensifying the sharp sell-off on Wall Street," noted Peter Chung, head of research at Presto Research.
"All risky assets are declining, not just cryptocurrencies," Chung continued. "Rather than any particular news, this is a manifestation of market nervousness after a weekend when participants were contemplating recent headlines about tariffs, trade wars, and recession fears amid government spending cuts in Washington."
Trump's Tariff Gambit
Trump doubled the tariff on Chinese imports to 20%. The American leader also threatened to impose significant duties on imports from Canada and Mexico but subsequently postponed this decision until April 2.
Some analysts are proposing an interesting theory regarding Trump’s actions. They believe the upcoming payments on U.S. government debt, which currently stands at $35.5 trillion, might be the main reason the current president is not opposed to a strong stock market drop. According to this version, Trump's strategy is to cause a significant fall in stock prices, which would lead to a bond market boost and subsequent rate cuts. The U.S. government needs to refinance $7 trillion in payments over the next six months, and the administration is not interested in doing so at current high rates. Therefore, a stock market crash could trigger a rise in bond prices, reducing their yields and allowing the government to service its debt at more favorable rates.
BitMEX co-founder Arthur Hayes has urged investors to remain patient. "Plan: be damn patient. Bitcoin is likely to bottom out around $70,000. A 36% correction from the all-time high of $110,000 is quite normal for a bull market," Hayes stated today in an X post.
"Traders will try to buy on declines. If you are more cautious, wait for central banks to ease policies and then invest more capital. You might not catch the exact bottom, but you won’t suffer the moral anguish of a prolonged sideways period and potential unrealized losses," Hayes added.
Market Experts’ Expectations
According to Chung from Presto, it is difficult to determine how long the current situation will last, but given the market’s growing expectations for a Fed rate cut in the first half of this year amidst market nervousness, "the next key event to watch for signs of a possible bottom is the Federal Open Market Committee (FOMC) meeting next week (March 19)."
"Powell is likely to leave the rate unchanged, but the market will eagerly look for any signs of easing in his statements, which may point to a potential rate cut at the FOMC meetings in May or June," Chung emphasized.