Crypto and equity traders had been holding out hope for a resolution that would avert the impending 104% tariffs on Chinese goods scheduled to take effect on April 9. However, the White House has confirmed that these tariffs will be enacted, leading to a downturn in markets. Peter Navarro, a trade adviser to President Trump, remarked that these tariffs are “not a negotiation,” which has heightened concerns among investors.
As a consequence, the S&P 500 index suffered a close on April 8 with a significant loss of 1.6%, erasing earlier gains of 4%. This recent decline has left traders questioning Bitcoin’s ability to regain its bullish momentum amid deteriorating macroeconomic conditions.
Debt Concerns and Their Implications for Bitcoin
The S&P 500 index fell by 14.7% between April 2 and April 7, inciting panic among Bitcoin holders and leading to a retest of the $75,000 level—the lowest that Bitcoin has seen in over five months.
S&P 500 futures (left) vs. Bitcoin/USD (right). Source: TradingView / Cointelegraph
During a joint appearance with Israeli Prime Minister Benjamin Netanyahu on April 7, President Trump expressed intentions to “reset the table” regarding trade. He alluded to the possibility of both permanent tariffs and negotiations, which reflects the prevailing uncertainty surrounding trade relations. This uncertainty has stalled IPOs, mergers, and bond sales, as reported by Yahoo Finance.
The potential for a stock market rally does exist, provided that trade war risks diminish. However, economists warn that ongoing tariffs could spur inflation and increase the likelihood of a potential economic recession. Understanding the specific impact on Bitcoin’s valuation poses a challenge, as many view the cryptocurrency’s fixed supply as protection against the broadened expansion of fiat currencies.
Bitcoin’s Short-Term Correlations and Market Dynamics
In the near term, Bitcoin is likely to remain positively correlated with the stock market. At the same time, U.S. fiscal challenges may create an environment conducive to Bitcoin appreciation. The yield on the U.S. 10-year Treasury rose to 4.28% on April 8 after dipping to 3.90% just a day prior. This upward trend suggests that investors are demanding greater returns on these assets.
US Dollar Index (DXY, left) vs. US 10-year Treasury yield (right). Source: TradingView / Cointelegraph
The increasing burden of rolling over approximately $9 trillion in federal government debt, which will mature within the next year, is likely to aggravate fiscal imbalances and weaken the U.S. dollar. The U.S. Dollar Index (DXY) fell to 103.0 on April 8 from 104.2 on March 31. This decline could potentially create upward momentum for Bitcoin’s price, an outlook previously expressed by BlackRock CEO Larry Fink in his March 31 communication to investors.
Michael Gapen, chief U.S. economist at Morgan Stanley, indicated in a client note that the Federal Reserve is likely to maintain interest rates between 4.25% and 4.50% until March 2026. He implied that a recession might compel the Fed to consider earlier and larger rate cuts.
As the implications of fiscal policy continue to unfold, Bitcoin’s prospects may turn positive. Traders may begin to perceive the necessity for alternative assets as the Federal Reserve encounters limited options to mitigate a recession without stoking inflation. While timing a major breakout is fraught with uncertainty, persistent trade war challenges could incentivize investors to seek safer havens, including Bitcoin, particularly amidst fears of a devalued U.S. dollar.
This article is for general informational purposes and should not be construed as legal or investment advice. The opinions expressed herein do not necessarily reflect those of Cointelegraph.
