Oh, dear! It appears that Bitcoin has taken a rather dismal turn, with its weekend gains evaporating faster than a magician’s rabbit. The brief flicker of hope, courtesy of Trumpās Crypto Reserve announcement, has been snuffed out like a candle in a windstorm, leaving the underlying macroeconomic woes to loom ominously.
As if that weren’t enough, Trumpās tariffs against his closest trading partners are still on the docket, and the Federal Reserve is predicting a decline in US GDP that could rival the worst of the pandemic. A broader recession, it seems, is poised to give the crypto industry a good kicking.
Bitcoin Takes a Nosedive of 10% as Recession Looms
The price of Bitcoin has been more volatile than a cat on a hot tin roof these past few days. Last week, the Crypto Fear and Greed Index plummeted to its lowest level since 2022, leaving Bitcoin looking as bearish as a grumpy old bear in winter.
Just yesterday, Trumpās announcement of a crypto reserve sent token prices soaring, but today? Well, that momentum has vanished quicker than a politicianās promise.
Now, one might wonder why Bitcoin is looking so glum. It seems that Trumpās announcement was merely a bandage on a gaping wound, and not a particularly good one at that.
Last week, Bitcoin ETFs experienced their worst week ever, with a staggering $2.7 billion in outflows, as the Federal Reserve Bank of Atlanta predicted a 1.5% GDP decrease. Today, the mood has darkened even further.
The Fed is now predicting that the US GDP will shrink by 2.8% by the end of Q1 2025. From an economic standpoint, this is nothing short of apocalyptic, especially when compared to the rosy predictions of 3.9% growth just four weeks ago. Talk about a plot twist!
Macroeconomic Factors Spell Trouble for Crypto
The US economy hasnāt shrunk this much since the early days of the Covid-19 pandemic five years ago. These macroeconomic factors are sending out distress signals that Bitcoin might be in for a rough ride in the short term. In fact, market liquidations have soared to nearly $800 million today. Yikes!
Another delightful factor contributing to Bitcoinās rollercoaster ride is President Trumpās proposed tariffs. Some analysts have theorized that they arenāt the main culprit, and they might just be onto something.
However, the crypto market took a nosedive when Trump recently announced a 25% tariff on the EU, joining the merry band of tariffs on Canada, Mexico, and China.
āTrump: no room left for deal on tariffs on Mexico, Canada. [He] reiterates plan to double China tariff from 10% to 20%,ā claimed Walter Bloomberg via social media. Well, thatās just peachy!
In summary, macroeconomic factors are largely steering the ship of market sentiment in the crypto industry. Since the approval of Bitcoin ETFs, crypto has been snugly integrated into traditional finance. However, should the US economy tumble into a recession, the downsides of that integration will come crashing down like a poorly constructed house of cards.
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2025-03-04 00:49