Financial markets are experiencing mixed signals amid rising uncertainty. On February 25, the US debt ceiling was raised from $36.1 trillion to $40.1 trillion, marking a significant expansion in government borrowing. Following this, the benchmark 10-year Treasury yield dropped from 4.4% to 4.29%, reflecting market stabilization despite long-term borrowing concerns. However, both stock and crypto markets have continued their declines since February 21, with the S&P 500 down 3%, the Nasdaq100 falling 5%, and Bitcoin plunging 16%. Bitcoin is now trading 26% below its all-time high, erasing the so-called “Trump pump.” This simultaneous decline in stocks and bond yields highlights growing risk aversion and fears of an economic slowdown.
Recent US economic data released on February 21 underscores these concerns. The University of Michigan’s consumer sentiment index fell to 64.7, the lowest since November 2023. Existing home sales dropped 4.9%, and the S&P Global Purchasing Managers’ Index (PMI) fell to 50.4, signaling stagnating growth. Trade tensions have also increased, with former President Trump announcing plans to impose tariffs on Canada, Mexico, the European Union, and additional levies on Chinese goods.
Economist Chris Rupkey warned of a potential economic downturn, stating, “The economy is coming in for a crash landing this year.” In the crypto market, the Fear & Greed Index has plunged to 10, indicating extreme fear.
Despite the downturn, some analysts see hope in expanding global liquidity. The M2 Global Liquidity Index suggests that Bitcoin could rebound as liquidity strengthens. Historical trends indicate BTC typically lags 60 days behind major liquidity movements, hinting at a potential recovery by June. Analysts like Jeff Park and Jamie Coutts emphasize that while Bitcoin may face short-term volatility, a significant liquidity wave could drive future gains.
— news from Cointelegraph