Bitcoin Drops 5% Amid Trade Tensions, Recession Fears

Bitcoin's price experienced significant volatility over the weekend, dropping by 5% on Sunday to fall below the $80,000 mark before stabilizing around $82,000. This decline places the cryptocurrency approximately 25% below its all-time high of $109,900. Analysts attribute this downturn to ongoing trade tensions, linked to recent tariff measures, and fears of an impending recession.

Concurrently, the weakening US Dollar Index (DXY), which has fallen from 110 to 103 since mid-January, coincides with the current administration's policies and could serve as a bullish catalyst for Bitcoin's price. Jamie Coutts, Chief Crypto Analyst, offers insights into the current market environment, highlighting two key metrics that could influence central bank policy and, consequently, Bitcoin's trajectory. He describes the situation as a high-stakes game of chicken between Bitcoin and central banks.

Coutts explains that while the dollar’s recent decline supports a bullish outlook for Bitcoin, rising Treasury bond volatility and widening corporate bond spreads are causing concern. He emphasizes the role of US Treasuries as the global collateral asset, noting that any spike in their volatility forces lenders to impose larger haircuts on collateral, tightening liquidity. Coutts warns that above 110 on the MOVE Index, there will likely be concerns at the central planner levels.

Over the past three weeks, US investment-grade corporate bond spreads have been widening, a shift Coutts views as a signal that risk assets, including Bitcoin, could face pressure. He notes that this suggests the demand keeping yields compressed relative to Treasuries is fading, and further widening could be negative for risk assets.

Despite these cautionary flags, Coutts remains optimistic about Bitcoin’s medium-term prospects, primarily due to the dollar’s rapid decline. He notes that the dollar’s drop in March, one of the most significant monthly dips in 12 years, historically has coincided with bullish inflection points in Bitcoin’s price. According to his research, these points have occurred at Bitcoin bear market troughs or mid-cycle bull markets.

Coutts also cites key catalysts that could propel the digital asset higher, including nation-state adoption, corporate accumulation, ETF positions, and liquidity dynamics. He mentions that Bitcoin appears to be filling a significant gap and reiterates his view that a slide below