U.S. economy contracting for the first time in three years sends Bitcoin tumbling.
In a Nutshell- The economy took a dip in Q1 2025, largely due to uncertainty surrounding President Trump's tariffs, resulting in Bitcoin plummeting below $95,000 and other altcoins like Ethereum and Solana experiencing a drop of 3%.- Trump's tariffs have stoked concerns of a recession, with the economy contracting for the first time since 2022. U.S. trade policies have been unsettling markets, with the S&P 500 and Nasdaq sinking over 2%.
Got the Skinny on SCENEThe conflicting economic scenario set off alarm bells for traders, leading Bitcoin to plunge below $95,000. Altcoins weren't immune to the fallout either, with Ethereum and Solana both enduring a 3% decline.
President Trump's trade tariffs have cast a shadow over the economy, causing worries about a possible recession. The U.S. Bureau of Economic Analysis reported that the economy contracted at an annualized rate of 0.3% in Q1 2025, marking the first quarterly decline since 2022.
Economists had anticipated growth of 0.3%, but the reading revealed the extent of economic hardship due to Trump's tariffs. Bitcoin was spotted flitting around $94,300, a sneaky dip following the snippet on Wednesday, according to CoinGecko.
Tariffs haven't just nipped at the heels of the economy; they've taken a big bite out of byproducts as well. The ADP jobs report in April indicated that employers added a lackluster 62,000 jobs, about half of what analysts had predicted.
Cautious about its preferred inflation gauge, the Personal Consumption Expenditures, the U.S. central bank has yet to witness the impact of Trump's tariff war.
Major U.S. equity indexes have been unslide-y, sporting negative territory with the S&P 500 and nasdaq giving a dive of over 2%. Bitcoin has often correlated with stock movements in the past.
The Federal Reserve cut its benchmark rate to a target range of 4.25% to 4.50% in 2024, sending Bitcoin soaring. However, the Fed has become increasingly cautious this year due to potential shifts in trade and immigration policy under Trump, which could complicate the Fed's efforts to restore price stability.
Consumer sentiment remains in the dumps, according to soft data like the University of Michigan's consumer survey. Q1 2025's disappointing economic growth data only confirmed what soft data had hinted: That Trump's tariffs are hindering the economy's ability to thrive.
While Trump announced a 90-day pause on "reciprocal" tariffs earlier this month, tariffs have already been implemented extensively. These include 25% levies on steel and aluminum imports, a 10% base tariff on imports from nearly every nation, sector-specific tariffs, and whopping 145% tariffs on Chinese goods.
U.S. Treasury Secretary Scott Bessent hinted that American retailers might weather the tariff storm, despite warning signs. "We have some great retailers," Bessent told Fox News. "I assume they pre-ordered. I think we'll see some elasticities [...], and then we will see how quickly the Chinese want to de-escalate."
- The drop in Bitcoin below $95,000 and the 3% decline in altcoins like Ethereum and Solana can be attributed to the economic uncertainty caused by President Trump's tariffs.
- The economy's contraction in Q1 2025, the first since 2022, has raised concerns about a potential recession, which could affect various sectors, including crypto and finance.
- Trump's tariffs have not only impacted the economy but also affected byproducts, such as job creation, as evidenced by the ADP jobs report in April.
- Bitcoin, which often correlates with stock movements, has been affected by the negative performance of major U.S. equity indexes, such as the S&P 500 and the Nasdaq.
- The Federal Reserve's monetary policy decisions, such as the cut in its benchmark rate in 2024, can have significant implications for the crypto market, including Bitcoin.
- President Trump's tariff war has made the U.S. central bank increasingly cautious due to potential shifts in trade and immigration policy, which could complicate efforts to restore price stability.
- Despite Trump's recent announcement of a 90-day pause on "reciprocal" tariffs, they have already been extensively implemented, including 25% levies on steel and aluminum imports, a 10% base tariff on imports from nearly every nation, and sector-specific tariffs.
- U.S. Treasury Secretary Scott Bessent has suggested that American retailers may be able to weather the tariff storm, but the long-term effects on the economy, including the crypto market, remain uncertain.
