Bitcoin’s ‘Trump trade’ is over — Traders shift hope to Fed rate cuts, expanding global liquidity

The financial markets send mixed signals because the uncertainty has new heights. On February 25, the American debt ceiling increased from 36.1 billions to 40.1 billions of dollars, marking another massive expansion of government loans.

Following a historic model, the yield of the Treasury to 10 years of reference reacted to news by going from 4.4% to 4.29%. Although this may seem counter-intuitive, the markets tend to interpret the resolutions of the debt ceiling as stabilizing events, reducing short-term uncertainty even if they imply a higher loan.

However, the stock markets and cryptography, which generally benefit from lower bond yields as capital runs in risk assets, continued their fall which began last week. Since February 21, the S&P 500 has lost 3%, the NASDAQ100 has dropped by 5%and Bitcoin has plunged 16%. The main cryptocurrency is now negotiated 26% below its summit of all time reached on the day of the inauguration of President Donald Trump, effectively erasing the Trump pump.

A simultaneous decrease in bond shares and returns is not typical market behavior and suggests growing aversion and economic slowdown.

Economic uncertainty is looming in the markets

Recent American economic data published on February 21 have shown significant signs of weakness. The feeling of consumer feeling of the University of Michigan fell to 64.7 in February, against 71.7 in January. This marks the lowest level since November 2023 and came below the preliminary estimate of 67.8, which was also the consensus forecast among the economists questioned by Reuters.

Sales of existing houses dropped by 4.9%, and the index of overall purchase managers S&P (PMI) increased from 52.7 in January to 50.4, the lowest since September 2023. PMI follows the manufacture and activity of the services, and a reading barely above the threshold that separates the expansion of the contraction indicates the stagnation of the growth of the private sector.

Trade tensions add to the uncertainty of the market. On February 24, Trump said that the prices on Canada and Mexico “will go before” after the end of the deadline for a month’s delay next week. Trump’s plan to impose 25% prices on the European Union, revealed on February 26, and an additional 10% levy from Chinese products added to the growing anxiety of the market

In commenting at CNBC, Chris Rupkey, chief economist of FWDBBB, said shameless, said shamelessly,

“The economy is about to bring out the carpet less than Washington policies cause a rapid loss of confidence on the part of consumers.”

Rupkey has developed: “The economy arrives for an landing accident this year. Bet on it. The bond market is.

On the cryptography market, the index of fear and greed has plunged to 10, or an extreme fear – a contrast that is striking with the levels of greed observed in early February.

A small crisis to justify quantitative relaxation?

In January, the former CEO of Bitmex, Arthur Hayes, hypothesized that a battle on the debt ceiling – combined with a reluctance to spend the general treasury account – could push the treasury yields to 10 years old above 5%, triggering a stock market crash and forcing the federal reserve to intervene.

In his opinion, it could help President Trump to put pressure on the Fed to adopt a fashion position. In other words, a small crisis to justify QE and stimulate the economy.

For Hayes, this mini-crise must occur at the start of Trump’s presidency, during the first quarter or first quarter, he could therefore blame him on the lever effect accumulated during the Biden administration.

“A financial mini-crise in the United States would provide the monetary mana crypto. It would also be politically opportune for Trump. I think we get back to the top of all previous time and redmits the entire Trump bump. “”

Ironically, even if the debt ceiling has been increased with a minimum drama and the 10 -year -old treasure yields have in fact dropped, the stock market has always dropped. The most urgent question is now whether it will lead to interest rate drops.

The Fed remains neutral, recent economic data providing few reasons for a change in imminent policy. The latest IPC report on February 11 has shown that inflation is accelerating 0.5% from one month to another, bringing the annual rate to 3%, both exceeding expectations. The president of the Fed, Jerome Powell, stressed that the central bank will not rush to reduce the rates more. Despite this position, a combination of weakening of economic indicators and expansion of liquidity could possibly force the hand of the Fed later this year.

In relation: Short -term crypto traders sent a record of 79.3K Bitcoin to the balance sheets while BTC crashed at $ 86,000

The price of bitcoin and M2 changes have different rhythms

Despite the current slowdown in the market, all hope is not lost, because a massive wave of expansion of liquidity could be on the horizon. The expansion of global liquidity M2 could breathe fresh air in risk markets, in particular Bitcoin. However, it could take some time.

The offset of the 3 -month M2 global liquidity index provides a useful framework for providing market movements focused on liquidity. This indicator moves data from the three -month M2 money supply to analyze its relationship with risk assets.

Crypto Analyst Crypto Rover underlined it on X, declaring:

“Global strengthening of liquidity. Bitcoin will follow soon.

Historical performances show that the BTC is generally lagging behind at around 60 days behind the main global liquidity movements. The current drop perfectly inscribes this image, which also promises a solid rebound by June if the liquidity trends are maintained.

Jeff Park, chief of Alpha Strategies in Bitwise, echoed the feeling:

“Bitcoin can certainly decrease in the short term because it thrives on trend and volatility, both recently absent. But clever institutional investors do not need to catch each wave; They just can’t miss the biggest. And the largest wave of global liquidity is coming this year. »»

Jamie Coutts, cryptographic analyst of Realvision, also shared his point of view on the impact of the expansion of liquidity on the Bitcoin Prize.

“2 of the 3 basic liquidity measures in my context [global money supply and central bank balance sheets] have become bullish this month while the markets plunge. Historically, it was very favorable for Bitcoin. Dollar is the next Domino. The confluence is king.

This article does not contain investment advice or recommendations. Each investment and negotiation movement involves risks and readers should conduct their own research when they make a decision.