Traders in cryptocurrencies and equities were optimistic about a last-minute agreement that might avert the US from implementing 104% tariffs on Chinese imports. However, during a press conference, the White House announced that these tariffs would take effect on April 9. Market conditions worsened further when Peter Navarro, trade adviser to US President Donald Trump, emphasized that tariffs were “not a negotiation.”
Consequently, the S&P 500 index closed on April 8 with a 1.6% decline, reversing earlier gains of 4%. This setback has left traders questioning whether Bitcoin
BTCUSD
can recover its bullish momentum in light of deteriorating macroeconomic circumstances.
Escalating U.S. debt challenges pave the way for potential Bitcoin growth
From April 2 to April 7, the S&P 500 index plummeted by 14.7%, inciting panic among Bitcoin holders and prompting a retest of the $75,000 mark—the lowest it has been in over five months.
While appearing alongside Israeli Prime Minister Benjamin Netanyahu on April 7, President Trump reportedly mentioned that his aim was to “reset the table” regarding trade. He noted that “permanent tariffs may exist, along with potential negotiations, as there are needs beyond tariffs.” In this state of flux, IPOs and mergers have encountered delays, with leveraged loan agreements and bond issuances being put on hold, as per Yahoo Finance.
It appears that the stock market is poised for a rally if the risks of a trade war diminish. Economists have warned that tariffs could incite inflation and significantly elevate the likelihood of a recession, as reported by Reuters. Nevertheless, evaluating the effect on Bitcoin’s price continues to be a complex task, considering some investors view the cryptocurrency’s fixed monetary framework as a hedge against the ever-expanding global fiat currency supplies.
Short-term correlations weigh on BTC, yet potential interest rate reductions could shift the dynamics
In the near term, the positive relationship between Bitcoin and the stock market is expected to continue. However, the US government’s fiscal problems might present a chance for Bitcoin’s value to appreciate. On April 8, the yield on the US 10-year Treasury note climbed to 4.28%, rebounding from a brief dip to 3.90% on April 7. This increase indicates that investors are seeking higher returns to hold these investments.
The escalating costs associated with rolling over the $9 trillion in federal government debt that will mature within the next year are anticipated to exacerbate fiscal imbalances and weaken the US dollar. The US Dollar Index (DXY) has deviated from US Treasury yields, dropping to 103.0 on April 8 from 104.2 on March 31. This scenario could potentially bolster Bitcoin’s pricing—a sentiment echoed by BlackRock CEO Larry Fink in his letter to investors dated March 31.
Michael Gapen, Morgan Stanley’s chief US economist, noted in a client memo on April 8: “We believe the appropriate course is for the Fed to maintain its current position for a longer period,” as cited by CNBC. Morgan Stanley’s updated forecast predicts that the US Federal Reserve will likely keep interest rates in the range of 4.25%-4.50% until March 2026, adding that “only a recession would alter this plan” and “a recession may necessitate earlier and larger upfront reductions.”
Bitcoin’s trajectory is expected to shift positively as traders recognize that the US Federal Reserve has limited options to avert a recession without incurring inflation risks. Although the precise timing of a potential breakout remains uncertain, prolonged delays in resolving trade war disputes could lead investors toward rare assets like Bitcoin, especially amid concerns over possible devaluation of the US dollar.
This article is intended for informational purposes only and should not be construed as legal or investment advice. The opinions, thoughts, and viewpoints expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.
