Bitcoin encounters a downward trend as its recent weekend profits dissipate entirely. Although a temporary halt in negative momentum was prompted by Trump’s Crypto Reserve announcement, the fundamental macroeconomic challenges persist.
Bitcoin Experiences 10% Decline As Recession Looms
Bitcoin has been subject to significant fluctuations in value over the recent days. The Crypto Fear and Greed Index reached its lowest point since 2022 last week, reflecting a bearish outlook for Bitcoin driven by a combination of critical factors.
A brief spike in token prices followed Trump’s announcement about a crypto reserve, yet that upward momentum has completely diminished in the wake of continued uncertainties.
Several underlying factors contribute to the current bearish sentiment surrounding Bitcoin. The positive impact of Trump’s announcement may merely be a temporary fix for deeper economic wounds.
Recently, Bitcoin ETFs experienced significant outflows, totaling $2.7 billion, marking their worst performance to date. As the Federal Reserve Bank of Atlanta revised its predictions and forecast a 1.5% decline in GDP, the outlook has further deteriorated.
The Federal Reserve’s latest predictions indicate a potential contraction of 2.8% in the US GDP by the conclusion of Q1 2025. This scenario represents a drastic reversal compared to forecasts made just a month earlier, which anticipated a 3.9% growth.
Macroeconomic Conditions Deteriorate for Cryptocurrency
The scale of decline in the US economy has not been witnessed since the early stages of the COVID-19 pandemic five years ago. These macroeconomic trends present compelling evidence that Bitcoin may face bearish pressures in the short term. In fact, market liquidations have surged to nearly $800 million today.
Another key factor influencing Bitcoin’s recent volatility includes President Trump’s proposed tariffs. While some analysts believe that this may not be the main cause of the current downturn, the reality remains that the crypto market spiraled downward following the announcement of 25% tariffs on the EU, extending to existing tariffs on Canada, Mexico, and China.
“Trump: no room left for deal on tariffs on Mexico, Canada. [He] reiterates plan to double China tariff from 10% to 20%,” reported Walter Bloomberg via his social media account.
This statement emphasizes that macroeconomic conditions predominantly drive sentiment across the crypto landscape. Since the approval of Bitcoin ETFs, the cryptocurrency’s intertwining with traditional financial systems has become increasingly pronounced.
However, if the US economy slips into a recession, the pitfalls associated with this integration will become starkly evident. Investors may face unprecedented challenges as the landscape evolves, potentially increasing their vulnerability during economic crises.
