Bitcoin Surges 11% to Record High as US Stocks Drop 3.45%

Crypto prices rose this week as US stock indices like the Dow Jones, S&P 500, and the Russell 2000 dropped sharply. The US dollar index also had the worst performance since April, when Donald Trump announced his “reciprocal” tariffs.

Bitcoin (BTC) jumped to a record high of $111,900, while the market capitalization of all altcoins excluding Bitcoin soared to $1.29 trillion, the highest point since February this year. The Dow Jones, which tracks 30 blue-chip companies, dropped to $41,340, down by 3.45% from its highest level this month. Other top blue-chip indices fell by over 1.2%, erasing billions of dollars in value. The US Dollar Index, which tracks the greenback’s performance against a basket of currencies, dropped to $99.10, moving into a technical correction. A correction happens when an asset’s price drops by 10% from a local top.

Bitcoin price outperformed U.S. stocks and the greenback because of its emerging role as a safe-haven asset as BlackRock predicted in this white paper. In it, the biggest asset manager in the world noted that gold was becoming a hedge against the soaring US public debt. Therefore, Bitcoin rose after Moody’s downgraded the US credit rating from Triple-A to a notch lower, citing the substantial debt. Moody’s joined the other two rating agencies, which have also slashed their Triple-A rating.

The sell-off of stocks and the US dollar continued after the House of Representatives voted for Donald Trump’s “Big Beautiful Bill,” which cuts over $4 trillion in taxes. The bill is estimated to increase the public debt by $4 trillion to $5 trillion over a decade, a concerning development as the national debt is approaching $37 trillion. U.S. stocks dropped on Friday after Trump warned that the U.S. would implement a 50% tariff on European goods on June 1. The EU has warned that it will reciprocate, a move that will disrupt annual trade volumes worth over $1.7 trillion.

Analysts note that Bitcoin’s fundamentals are strong enough to withstand these concerns. For one, data shows that demand among institutions is rising, as supply continues falling this year. Bitcoin is also seen as digital gold, which may help it do well in the long term. The rally in cryptocurrency prices, particularly Bitcoin, was driven by growing optimism surrounding a more favorable regulatory environment under the Trump administration. This optimism was fueled by the perception that the administration was becoming increasingly friendly towards cryptocurrencies, which boosted investor confidence and led to a significant price increase.

Conversely, the Dow Jones Industrial Average and the U.S. dollar index faced downward pressure due to renewed trade war threats and concerns over global trade tensions. President Trump's announcement of potential tariffs on EU imports and other goods sparked a rapid sell-off in traditional markets. Investors became wary of the economic implications of these tariffs, leading to a decline in stock prices and the value of the U.S. dollar. The U.S. dollar's decline was further exacerbated by concerns over U.S. debt and the potential for a credit downgrade. Moody's U.S. credit downgrade and Trump's tax bill raised concerns about the growing deficit, leading traders to shift their focus to support levels and causing the dollar to drop by 1.35%.

The overall market sentiment was influenced by these geopolitical tensions and regulatory developments. While cryptocurrencies benefited from regulatory optimism, traditional markets were weighed down by trade war fears and economic uncertainties. This dynamic highlights the differing responses of various asset classes to external factors, with cryptocurrencies often seen as a hedge against traditional market volatility. The divergence in performance between crypto prices and traditional markets underscores the unique characteristics of digital assets, which can sometimes move independently of broader economic trends. This week's events serve as a reminder of the complex interplay between geopolitical events, regulatory changes, and market sentiment, all of which can significantly impact asset prices.