In early April, Trumps reciprocal tariff policy triggered a plunge in global assets. Trump then admitted that tariffs will be significantly reduced and confirmed that Federal Reserve Chairman Powell would continue to serve, easing concerns about turmoil in the Feds leadership. After investors were appeased, a new wave of risk appetite was triggered, and Bitcoin was the first to rise strongly.
Judging from the data, although the US macroeconomic hard indicators such as consumption and employment in April have not yet suffered a substantial impact, the risks have obviously increased: in March, the US non-farm employment increased by 151,000 (expected to be 170,000), and the unemployment rate rose to 4.1%, which were better than expected; but on the other hand, the reciprocal tariff policy implemented by the Trump administration in April, with the average tax rate soaring from 2.4% to 21.4%, caused the import commodity price index to rise by 18.6% year-on-year, among which the rush to buy before the automobile tariff pushed retail sales in March to surge by 1.4% month-on-month, but the actual consumption momentum after excluding automobiles only increased by 0.5%, down 0.15 percentage points from February.
This policy-driven short-term consumption overdraft is in stark contrast to the largest drop in the Consumer Confidence Index since 1978 in April: The preliminary value of the University of Michigan Consumer Confidence Index in April was 50.8, significantly lower than the expected 53.5, and the previous value in March was 57, and it was the fourth consecutive month of decline. The preliminary value of the University of Michigans 1-year inflation expectations in April soared to 6.7%, a new high since November 1981, with an expected 5.2% and a previous value of 5%; the preliminary value of the 5-year inflation expectations was 4.4%, the highest level since June 1991, with an expected 4.3% and a previous value of 4.1%. Soft indicators such as expectations have weakened significantly, revealing various unsustainable trends.
The US economy is facing a stagflation dilemma of high inflation-low growth-policy conflict. The backlash effect of tariff policies will accelerate through the three channels of supply chain, job market and consumer confidence. The International Monetary Fund (IMF) released the latest World Economic Outlook report, lowering the global economic growth forecast for 2025 from 3.3% to 2.8%. Among them, the US growth forecast was halved to 1.8%, and the eurozone to 0.7%.
Looking at the Fed, the Feds PCE inflation rate has been above the 2% target for 14 consecutive months, and short-term inflation expectations jumped to 3.8% in April, the highest since 1982. Under this circumstance, the Fed decided to maintain the federal funds rate at 4.25%-4.50% at its interest rate meeting on March 19, which is obviously in a triple dilemma: rate cuts may exacerbate the de-anchoring of inflation expectations, rate hikes will accelerate economic recession, and maintaining the status quo will face pressure from the president. Fed Chairman Powell said that policymakers will continue to observe the economic situation, especially inflation and growth data, and wait for more clear signals before considering adjusting interest rates.
As the anchor of global monetary policy, the Federal Reserve is experiencing the most severe test of policy imbalance in nearly four decades. According to general forecasts from the outside world, in the most optimistic scenario, if inflation falls faster than expected, the Federal Reserve may turn to a neutral interest rate more quickly, or even start cutting interest rates in the first half of 2025 (May or June).
Throughout April, US dollar assets were hit by policy uncertainty and economic downturn, especially in the first half of the month when market sentiment was extremely pessimistic. First, on April 3, the three major US stock indexes suffered a historic plunge, with the Dow Jones Industrial Average falling 5.50%, the Nasdaq falling 5.82%, and the SP 500 falling 5.98%, the largest single-day drop since March 2020 1. Technology stocks have become the hardest hit, with Apple, Tesla, Nvidia and other companies falling sharply due to rising supply chain costs and restricted exports. Nike fell 14.44% in a single day due to high tariffs in Vietnam and Indonesia. Bruce Kasman, head of economic research at JPMorgan Chase, even raised the probability of a US recession to 79%, reflecting the markets deep concern about the long-term negative impact of tariff policies.
U.S. stocks rebounded significantly at the end of the month. On April 23, the SP 500 rose 9.52% in a single day, and the Nasdaq rose 12.16%, setting the second largest single-day gain in history. This rebound was partly due to the markets expectations of possible adjustments to tariff policies, such as the U.S. Customs and Border Protections announcement of tariff exemptions for some electronic products. In addition, the earnings reports of some technology giants that exceeded expectations also boosted market confidence, such as Googles AI business growth and $70 billion stock repurchase plan.
Although the US stock market recovered most of the tariff losses at the end of the month, the uncertainty of Trumps policies and the downward trend of the US economy will form a stronger resonance in the future, and the US stock market may still bear the brunt. Wall Street generally believes that this rebound may only be a technical repair in the bear market. Bank of America strategist Michael Hartnett warned that investors should sell on rallies because the market still faces policy uncertainty and the risk of economic recession. Goldman Sachs also pointed out that if the tariff policy is not substantially relaxed, the US stock market may come under pressure again.
The short-term rebound in U.S. stocks remains shrouded in clouds until the Federal Reserve restarts its interest rate cuts to save the market and tariff negotiations make progress.
Although Bitcoin was also hit hard by the tariff stick in April, it performed beyond market expectations and redefined its position among global assets:
First, in mid-to-late April, the price of Bitcoin broke through the $94,000 mark, with a single-day increase of more than 3%, setting a new high for the year. This rise echoed the trend of gold hitting a new high, highlighting its attribute as digital gold. In sharp contrast to the US stock market, which was hit by tariff policies during the same period, the volatility of Bitcoin in April dropped significantly. This stability attracted medium- and long-term funds to enter the market at an accelerated pace. From April 21 to 23, the US Bitcoin spot ETF had a net inflow of more than $900 million for three consecutive days, pushing the global total market value of cryptocurrencies to exceed $3 trillion, rekindling the bullish sentiment of the entire cryptocurrency market. Investor confidence once rose to its highest level in more than two months. The US media called it an alternative option for seeking a safe haven. In this wave of gains, the collective wealth of long-term holders (LTHs) has increased significantly. According to CryptoQuant data, from April 1 to 23, the market value realized by long-term holders increased from US$345 billion to US$371 billion, an increase of US$26 billion, indicating that long-term holders were rewarded for their persistence.
According to CryptoQuant statistics, Bitcoin experienced a correction of more than 30% from January to early April, which is consistent with the historical market cycle patterns in 2013, 2017, and 2021. Usually, a correction occurs after reaching a new high, and the upward trend resumes after washing out weaker investors. In addition, the decoupling of Bitcoin from traditional markets and investors demand for non-correlated assets (such as the price of gold rising to a new high of $3,500) have strengthened the confidence of long-term holders in Bitcoins value storage.
Data from Cointelegraph shows that there are currently 16.7 million BTC in various wallets that are in profit - a level often referred to as the threshold of optimism. Historically, similar patterns in 2016, 2020, and early 2024 have led bull markets. When profitable supply remains above this area for a sustained period, it tends to boost investor confidence and trigger sustained price momentum, usually pushing Bitcoin to new all-time highs within a few months. After Bitcoin broke through $90,000, the number of active addresses on the chain surged 15%, and the number of whale wallets (holding more than 1,000 BTC) hit a four-month high, further verifying the bullish consensus of funds.
Driven by the surge in Bitcoin prices, the total market value of global cryptocurrencies exceeded US$3 trillion on April 23, with Bitcoins market value reaching US$1.847 trillion, surpassing the two global technology giants Alphabet (Google) and Amazon, as well as the precious metal silver, becoming the fifth largest asset after gold (US$22.344 trillion), Apple (US$3.000 trillion), Microsoft (US$2.726 trillion), and Nvidia (US$2.412 trillion).
The ranking increase makes Bitcoin the only digital asset in the worlds top ten assets list. More notably, Bitcoins long-term correlation with US technology stocks (especially the Nasdaq 100 Index) has decoupled. During April, Bitcoin prices soared 15%, while the Nasdaq 100 Index rose only 4.5% during the same period, highlighting its independent market performance and asset attribute changes. Compared with the stock market volatility caused by the tariff policy in April, Bitcoin has recently shown stronger price stability and lower volatility, which may prompt more listed companies to consider allocating crypto assets in their financial strategies.
There is no doubt that crypto assets are rewriting the underlying logic of global asset pricing. In April, Cathie Wood, founder of ARK Invest, raised the target price of Bitcoin by 2030 from $1.5 million to $2.4 million based on the increase in institutional interest and the growing acceptance of Bitcoin as digital gold.
At present, the market rebound in April temporarily eliminated the doubts that tariffs would cause a market collapse and economic recession. Further trends will depend on whether the tariff war can be ended in time and the trend of the US economy. Given that the most optimistic rate cut is also after January, market differences are still there, and short-term fluctuations are inevitable. When traditional financial markets are in turmoil due to tariff wars and economic cycles, the independence and anti-cyclical properties of crypto assets may attract more funds seeking diversified asset allocation.
