Bitcoin's Downturn Linked to Trump's Economic Recession Readiness, Explains QCP Capital
U.S. Recession Fears Escalate, Affecting Crypto and Stock Markets
Investors are showing increased caution in the uncertain economic climate, with signals of a potential U.S. recession driving a flight from risk assets. These indications include President Donald Trump's apparent indifference to recession risks and his view of a Wall Street downturn as an "economic correction".
Bitcoin's price took a sharp dip, falling below $80,000, serving as a leading indicator for risk assets according to QCP Capital. The decline in U.S. Treasury yields and a weakening dollar, historically positive factors for risk assets, have also been noted.
In the crypto market, analysts have observed increased demand for long-term call options with high expirations, signaling a readiness for a quick recovery from support levels around $75,000. However, Matrixport remains skeptical about a short-term crypto market rebound, citing slowing inflows into stablecoins.
Multiple Wall Street firms have raised the probability of a U.S. recession, with JPMorgan moving it from 30% to 40%, and Goldman Sachs adjusting it from 15% to 20%. Impactful policies and increasing economic uncertainty are contributing factors, leading some to speculate that President Trump may be pressuring the Federal Reserve into cutting interest rates.
In the tech sector, QCP Capital suggested a short squeeze could occur after markets reach extreme fear levels. Researcher Timothy Peterson calculated that since 1990, the VIX fear index has been higher only 11% of the time, with the probability that the current downturn marks the bottom estimated to be 89%.
In the derivatives market, a sharp drop in open interest in Bitcoin and Ethereum futures indicates a deleveraging process, which could help stabilize the market. Former BitMEX CEO Arthur Hayes did not rule out a Bitcoin drop to $70,000 before a recovery, while CryptoQuant CEO Ki Young Ju predicted an extended consolidation phase between $75,000 and $100,000.
The overall consensus among analysts regarding the probability of a U.S. recession in 2025 presents a mixed picture, with concerns elevated compared to the start of the year. Prolonged trade tensions, consumer behavior, monetary policy, and price levels are the key contributing factors. Analysts will continue to monitor market indicators, consumer confidence, inflation, and Federal Reserve actions to gauge the economic outlook.
The potential U.S. recession has led to investors being cautious with their investments in both crypto and finance, causing a dip in Bitcoin's price below $80,000. This trend is also affecting the stock market and is being monitored closely in the general news, politics, and business sectors. Wall Street firms have raised the probability of a U.S. recession, with some analysts predicting a possible deleveraging process in the derivatives market for Bitcoin and Ethereum, which could help stabilize the crypto market. Meanwhile, the overall consensus among analysts presents a mixed picture regarding the probability of a U.S. recession in 2025, with key contributing factors being prolonged trade tensions, consumer behavior, monetary policy, and price levels.
