With over $5 trillion wiped off global stock markets since Trump’s tariffs were announced on April 2, economists worldwide are fearful that the so-called ‘Liberation Day’ may cause a recession so deep it “could tank much of the economy around the world.”

Panicked by the ferocious market reactions, on Friday, the president called on Federal Reserve Chairman Jerome Powell to cut interest rates, calling it the “perfect time” on his Truth Social platform. Yet Powell prefers to remain steady, foreseeing rising inflation and slower growth from the aggressive tariffs policy.

As Powell noted, the tariffs are likely to cause a temporary surge in inflation, which could become more persistent and make it premature to adjust monetary policy without clearer economic signals.

Some critics (Trump included) argue that Powell is too cautious, potentially missing the window for timely rate cuts. Trump’s same Truth Social post stated:

“He [Jerome Powell] is always ‘late,’ but he could now change his image, and quickly… CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!”

However, Powell emphasizes that the Fed is not in a hurry, preferring to wait for clearer economic signals before making policy adjustments. This cautious approach is driven by concerns over inflation, a persistent issue he expects to see exacerbated by the tariffs.

Despite Trump’s call for immediate action, Powell remains focused on maintaining inflation stability; a stance that might disappoint investors hoping for swift rate reductions.

As the markets tank, Bitcoin emerges as the hedge

As the world hangs by a thread in anticipation of tariff negotiations, retaliations, or rate cuts to avoid a potential economic armageddon, many are maintaining their eyes on Bitcoin, which seems to have shaken off its longstanding correlation with the stock market and other global risk-on assets.

The Dow Jones Industrial Average hemorrhaged over 2,200 points on Friday, adding to the previous day’s decline of 1,679 points, marking the worst two-day performance in history, and the Nasdaq and S&P500 experienced their worst drops since COVID. Meanwhile, Bitcoin barely fluctuated, holding steady at around $83k, even registering a slight gain at the time of writing.

Rajat Soni, a CFA charter holder and Bitcoin and finance analyst, commented:

“The S&P 500 has lost ALL OF ITS RETURNS since March 2024. Bitcoin is up ~30% in the same period.”

Tether CEO Paolo Ardoino simply stated “Bitcoin is the hedge.”

Director of Market Research at the crypto financial firm Unchained, Joe Burnett, said in a video post:

“Trump’s tariffs are here, U.S. equities are crashing, and China is retaliating. Now may be one of the best times to build a meaningful bitcoin position. Not financial advice.”

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Bitcoin and the broader crypto market are under significant pressure as macroeconomic concerns fuel investor anxiety.

In the past 24 hours, the price of BTC has fallen 2.2%, briefly touching $76,624 before recovering to $81,376 as of press time.

Ethereum (ETH), the second largest crypto asset by market cap, also dropped 10% to $1,760, its lowest level since November 2023. At the time of writing, ETH has slightly recovered to above $1900.

Other major assets, including Solana (SOL), XRP, Cardano (ADA), Dogecoin (DOGE), and Binance Coin (BNB), recorded significant losses of more than 4% each during the reporting period.

Data from Coinglass showed that the sell-off triggered a surge in liquidations, with 321,000 traders losing a combined $906 million.

According to the data, traders with long positions betting on further price increases suffered the most, with $732.2 million wiped out, while short positions accounted for $173 million.

Why did the market crash?

Macroeconomic uncertainty appears to be the primary driver of the market downturn, which has had a far-reaching impact.

Bitcoin analyst Fred Krueger attributed the plunge to fears of an economic downturn, saying:

“The reason Bitcoin is going down is simple: fear of recession.”

Over the weekend, US President Donald Trump did not dismiss the possibility of a recession, sparking fresh concerns across financial markets.

Analysts at The Kobeissi Letter highlighted Trump’s statement’s ripple effect, noting that technology stocks have suffered steep losses. The Nasdaq 100 has fallen 12.4% in 13 trading sessions, approaching bear market territory at its fastest pace since the March 2020 crash.

The analysts continued that cryptocurrencies have not been spared. Since peaking on Dec. 17, the market has shed $1.3 trillion, with a 35% drop in the last three months signaling a deepening correction.

However, with no clear catalyst to drive a reversal, the market remains vulnerable to further declines.

Arthur Hayes, BitMEX co-founder, suggested that Bitcoin could find a bottom around $70,000, marking a 36% decline from its $110,000 peak. However, he noted that such corrections are common in bull markets.

Nevertheless, he pointed out that:

“Traders will try to buy the dip, if you are more risk averse wait for the central banks to ease then deploy more capital. You might not catch the bottom but you also won’t have to mentally suffer through a long period of sideways and potential unrealised losses.”

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