Bitcoin (BTC) and the wider crypto market are facing increasing pressure amid growing concerns of a recession following remarks made by US President Donald Trump.
President Trump's recent comments on Fox News regarding the potential for an economic downturn have unsettled investors, leading to a significant sell-off across various risk assets, including Bitcoin.
BTC Experiences Decline Amid Recession Worries
During an interview on March 10 with Fox News, President Trump was questioned about the likelihood of a recession. While he refrained from making a definitive prediction, Trump acknowledged that some "disruption" was expected as the nation works on rebuilding its economic foundation.
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Trump's acknowledgment has shifted the sentiment, suggesting that the US economy might face short-term challenges before attaining long-term stability.
Trump's willingness to face an economic downturn to address underlying issues appeared to signal a readiness to implement necessary economic reforms, as noted by The Kobeissi Letter.
Although these reforms could be advantageous in the long term, this viewpoint has escalated concerns in the near future, particularly among Wall Street investors and cryptocurrency traders.
BTC Price Performance. Source: BeInCrypto
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Following these developments, Bitcoin prices fell below the critical level of $80,000. At the time of writing, BTC was being traded at $79,856, marking a nearly 3% decrease since the opening of Tuesday's session.
President Trump's comments echo recent warnings from the Federal Reserve about a potential recession, exacerbating market unease. The Fed's cautious stance has heightened bearish sentiment across cryptocurrencies.
The possibility of an economic slowdown prompting lower interest rates to stimulate growth has investors preparing for further short-term challenges.
Bitcoin and Stocks’ Reaction Amid Economic Uncertainty
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In a manner reflecting Bitcoin's behavior, traditional financial markets have responded swiftly. The S&P 500 has witnessed a loss of $5 trillion in market value over 13 trading days, while the crypto markets have shed approximately $1.3 trillion since their peak in December 2024.
Bitcoin, considered a gauge for risk appetite, has dropped by 35% within just three months.
This, coupled with persistent concerns regarding inflation and uncertainties regarding Federal Reserve policy, has fueled risk aversion among investors. The downturn in Bitcoin is in alignment with a broader shift in investment strategies, with institutional investors reducing their exposure to high-risk assets at the quickest pace since July 2024.
The famed "Magnificent Seven" stocks, which include major tech giants, have recorded their lowest exposure levels since April 2023. Furthermore, Tesla, a stock synonymous with high-risk trades, encountered a 15.4% decrease, highlighting the declining confidence in speculative assets amidst escalating recession fears.
The price fluctuations of Bitcoin have frequently correlated with macroeconomic uncertainties. Google Trends data indicates a surge in searches for "US recession," reaching levels not seen since August 2024—traditionally indicating impending market volatility. Similar spikes in searches in mid-2022 and late 2024 coincided with substantial Bitcoin price declines.
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US Recession Concerns Searches. Source: Google Trends
Adding to these worries, prediction markets like Kalshi have raised the likelihood of a US recession to 40%. These markets, aggregating real-time sentiments from investors, are often regarded as more reliable than traditional economic models in predicting downturns.
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Startup investor Rushabh Shah commented, "The prediction markets can often be more accurate than traditional economic models, reflecting real-time sentiments and information from traders."
While some analysts anticipate that a recession could lead to a looser monetary policy that may be beneficial for Bitcoin, the immediate future remains uncertain. Traders and investors must brace themselves for ongoing volatility.