USDB (usdb) 
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Bitcoin and other cryptocurrencies demonstrated resilience amid turbulence in the stock market, following Donald Trump’s announcement of Liberation Day tariffs. While traditional assets struggled, Bitcoin and Ethereum maintained relatively stable positions, highlighting their potential as alternative investments during economic uncertainty.
Cryptocurrency Market Performance
Despite market-wide volatility, Bitcoin traded between $80,000 and $90,000, showing strong support levels. Meanwhile, Ethereum hovered just below $2,000, reflecting cautious sentiment among investors. The overall cryptocurrency market cap saw a slight decline, dropping from $2.7 trillion to $2.6 trillion.
In contrast, the stock market experienced its worst week since 2020, with major indices like the Nasdaq 100, S&P 500, and Dow Jones entering correction territory. This divergence between cryptocurrencies and stocks underscores the growing interest in digital assets during economic downturns.
Federal Reserve’s Warning on Stagflation
Federal Reserve Chairman Jerome Powell issued a stark warning about the potential consequences of Trump’s tariffs, emphasizing higher inflation and slower economic growth. Powell stated,
“Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem.”
The Fed’s cautious stance on interest rate cuts stems from concerns about stagflation—a scenario where high inflation and unemployment coexist, making economic recovery challenging. Powell’s comments suggest that the Fed is unlikely to lower rates in the near term, a move that could impact Bitcoin, altcoins, and stocks negatively.
Trump’s Criticism of the Federal Reserve
Donald Trump voiced his disagreement with Powell’s approach, urging the Fed to cut interest rates immediately. He criticized Powell for “playing politics” and argued that reducing rates would be a timely intervention. However, the Federal Reserve operates as an independent government agency, making its decisions insulated from political influence.
Historically, assets like Bitcoin and stocks tend to perform better during periods of rate cuts. Analysts warn that a more hawkish Fed, coupled with recession predictions, could pressure cryptocurrencies and equities in the short term.
Positive Indicators from the Bond and Commodity Markets
Despite the Fed’s hawkish stance, certain market indicators suggest a potential shift toward rate cuts. Crude oil prices have plummeted, with Brent crude dropping to $64 and West Texas Intermediate falling to $62. Similarly, copper prices—a global economic barometer—have nosedived, signaling reduced demand and a possible recession.
The bond market also reflects economic concerns, with the 10-year and 2-year yields declining to 3.95% and 3.5%, respectively. These trends indicate growing uncertainty and could pave the way for a more dovish Federal Reserve policy.
Recession Odds and Rate Cut Predictions
Goldman Sachs recently raised the probability of a U.S. recession, predicting that the Fed could implement at least three rate cuts later this year. Historically, rate cuts have benefited risky assets like stocks, Bitcoin, and altcoins. For instance, these assets surged in 2020 following the Fed’s emergency rate cut at the start of the pandemic. Similarly, the stock market experienced a decade-long rally during the Global Financial Crisis due to sustained rate reductions.
Investors interested in cryptocurrencies should monitor macroeconomic developments closely. The interplay between Federal Reserve policy, recession risks, and global market trends could significantly impact the performance of digital assets in the coming months.
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