The bubble of “buy U.S. stocks and make money without doing anything” seems to be being punctured.
Affected by negative emotions such as the increasing concerns about the US economic recession, the US stock market suffered a "Black Monday" on Monday. As of the close of the day, the Dow Jones Industrial Average initially closed down 2%, the S&P 500 fell 2.7%, and the Nasdaq fell 4%. Tesla (TSLA.O) plummeted 15.4%, Apple (AAPL.O) fell nearly 5%, and Nvidia (NVDA.O) fell 5%.
In the crypto market, BTC fell below the $80,000 mark for the second time in three weeks, hitting a low of $77,400 in the past 24 hours. ETH fell back to around $1,800, and the total market value of cryptocurrencies fell by nearly 4%.
Arthur Hayes, co-founder of BitMEX and a well-known figure in the crypto space, seems to be coming true. He predicted that Bitcoin could fall to $75,000, and as market sentiment deteriorates, this prediction is becoming more and more credible.
In his latest tweet, Hayes reiterated that Bitcoin could fall further to $75,000, and warned: "If it enters this range, the market will experience violent fluctuations." He pointed out that the open interest of option contracts around $75,000 has turned on the "red light", indicating that market sentiment is extremely pessimistic.
Trump's few words shook the market, and the shadow of US economic recession loomed
U.S. Treasury Secretary Scott Bessent told CNBC on Friday that the U.S. economy could go through a "detox period" as the new administration cuts government spending.
Trump also addressed the possibility of a recession in a Fox News interview that aired Sunday, saying the economy is in a "transition period."
“I have to build a strong country, and you can’t just look at the stock market,” Trump said.
Goldman Sachs has recently significantly lowered its economic growth forecasts due to the potential impact of tariffs, further exacerbating the market's pessimism about the US economic outlook.
Data from the New York Fed showed that one-year inflation expectations were 3.13% in February, and expectations for a worsening financial situation in the coming year were the strongest since November 2023.
“We’re in the throes of an artificial adjustment, and I say artificial adjustment because it’s really a response to the new administration’s tariff plan or at least the threat of tariffs and what that’s going to do to the economy,” Sam Stovall, chief investment strategist at CFRA Research, told CNBC.
Institutional analysis points out that if the fears of a recession caused by the trade war come true, the Federal Reserve may begin a series of rapid interest rate cuts in June. The futures market has bet on a 25 basis point rate cut in June, July and October.
Tim Duy, chief U.S. economist at SGH Macro Advisors, warned that if the labor or financial markets slip, the Fed will face a dual risk: fighting inflation while resisting pressure from Trump to cut interest rates. However, it remains unclear whether rate cuts can save market confidence.
Analyst: Bitcoin needs to experience a "mini recession" before rebounding
Institutional investors are withdrawing from the crypto market, with crypto investment products seeing net outflows for the fourth consecutive week. According to CoinShares data, crypto funds saw $867 million in outflows last week, bringing the total outflow to $4.75 billion in four weeks. Most of the bearish sentiment came from the United States, where investors withdrew $922 million last week.
Zach Burks, CEO of NFT market Mintology, said that Bitcoin could fall to $72,000 due to inflation concerns and the waning appeal of Bitcoin as a "Trump trade." He pointed out: "Many investors are withdrawing from Bitcoin, which is the first time since Trump took office that it is considered a high-risk asset."
Burks believes that Bitcoin's failure to decouple from U.S. stocks has made it lose its function as a store of value. Instead, investors are turning to traditional safe-haven assets such as gold. He predicts that although Bitcoin may rebound to $110,000 this year, the market must first survive the "mini recession" caused by Trump's policies.
Gregory Daco, an economist at Ernst & Young, told CNN that the uncertainty and confusion of Trump's policies do not help the overall economic situation. He said: "The current situation is that the policy is unclear, the policy intention is unclear, and the policy goals are unclear. All of these factors combined make investors uneasy because it is unclear where the policy will eventually go."
So, in such an environment, Don't Fight it, Float with It. Before the storm comes, the real wisdom may not be to fight against the current, but to choose to drift safely with the current and accumulate strength.
