Bitcoin Drops 10% as Fed Warns of Recession

Bitcoin has officially lost all of the momentum gained over the weekend, turning into a strong downtrend amid growing macro pressures. Although the announcement of President Trump's establishment of the "Crypto Reserve Fund" has helped the market recover in the short-term, the core problems of the US economy have not been resolved, making the market outlook increasingly bleak. In addition, the plan to increase taxes on a range of key US trading partners continues to be maintained, while the Federal Reserve (Fed) warns of the most severe GDP decline since the COVID-19 pandemic. If the economic downturn occurs on a broad scale, the cryptocurrency market will certainly not be immune to the repercussions. Bitcoin plunges 10% amid economic recession risks Bitcoin has witnessed intense fluctuations in the past few days. Last week, the Fear & Greed Index of the cryptocurrency market dropped to the lowest level since 2022, signaling prevailing pessimism. The appearance of information about the 'Cryptocurrency Reserve Fund' from President Trump once helped Bitcoin and many other digital assets to recover strongly yesterday. However, the entire momentum was quickly erased in less than 24 hours. BTC is currently trading at $82,993, down 10% on the day.

Analysts believe that the announcement from Mr. Trump is just like a temporary lifebuoy in the midst of a big storm, as macroeconomic risks are becoming increasingly serious. Specifically, last week, Bitcoin ETF funds recorded a record net withdrawal of 2.7 billion USD - the largest amount since these products were launched. Meanwhile, the Atlanta Fed predicts that the US GDP will decrease by 1.5%. However, the situation is even worse today, as the latest forecast shows that the US GDP could plummet to 2.8% by the end of Q1/2025 - a truly shocking drop compared to the previously predicted growth of 3.9% just four weeks ago.

Recession Risks and Macro Pressures Overshadow Cryptocurrencies If this forecast comes true, it will be the most severe decline in US GDP since the COVID-19 pandemic in 2020. In this context, it is not surprising that the cryptocurrency market continues to experience strong sell-offs. Just today, the total value of positions liquidated in the market has exceeded $1 billion.

In addition, President Trump's recent statements about raising tariffs with major trading partners such as the EU, Canada, Mexico and China have also contributed to increased market uncertainty. Specifically, Mr. Trump has asserted that there will be no further negotiations on imposing tariffs on Mexico and Canada, while emphasizing the plan to double the import tariffs from China, from the current 10% to 20%. Immediately after this announcement, the digital asset market witnessed a widespread selling wave. In short, macro factors are becoming a complete dominator of investor sentiment in the cryptocurrency market. Since Bitcoin ETFs were approved and officially integrated deeper into the traditional financial ecosystem, cryptocurrencies have become more sensitive to global economic fluctuations. However, according to Goldman Sachs CEO David Solomon, the chances of the US economy falling into a recession are "very small", despite the uncertainties surrounding global trade policy. "How Trump will implement specific policies remains a source of uncertainty," Solomon told CNBC on March 4th. He also noted that "the Chinese economy is facing significant headwinds." Earlier in the day, Blackstone CEO Steve Schwarzman said at the same conference that the quarterly survey of 250 Blackstone-owned companies showed the U.S. economy remained stable, and no business leaders predicted a recession this year.