Geopolitical Storm Sinks Markets, Boosts Crypto Hopes
1min read Global markets have been grappling with a wave of uncertainty, as geopolitical tensions and trade disputes have sent shockwaves through traditional financial markets. The resulting risk-off sentiment has led to a plunge in Treasury yields, offering a glimmer of hope for the cryptocurrency market, which has been reeling from the collapse of speculative bubbles in memecoins.
The U.S. stock market averages have been in a state of retreat, triggered by a series of tariff threats from President Trump. The implementation of 25% levies against goods from Mexico and Canada, along with additional taxes on Chinese goods, has further exacerbated the situation. The Nasdaq, for instance, has fallen by 2.6% and is now trading below its pre-election levels.
As market sentiment sours, Treasury yields have been on a downward trajectory. The 10-year Treasury yield has dropped to 4.13%, a significant decline from the 4.80% level prior to the Trump inauguration six weeks ago. This trend is also reflected in the short end of the yield curve, where markets are dramatically repricing expectations for Fed rate cuts in 2025. The odds of at least one rate cut by the Fed's May meeting have risen to 47%, up from 26% a week ago, according to the CME FedWatch Tool. The chances of two or more rate cuts by the June meeting have jumped to 36%, from 15% a week ago.
While lower interest rates could potentially provide a boost to depressed crypto prices, the economic landscape remains far from a return to quantitative easing. The challenge lies in balancing inflation, which has been on the rise, currently standing at 3% year-over-year after four consecutive months of increases. The Federal Reserve must navigate a delicate balance, easing rates to help keep the economy out of recession without pushing inflation even higher.
