The US debt ceiling has been raised to $40.1 trillion, but the impact on financial markets is unclear. The benchmark 10-year Treasury yield dropped from 4.4% to 4.29%, which may seem counterintuitive given the increase in government borrowing. However, this move suggests that investors are seeking stability and reducing near-term uncertainty.
The stock market has continued its fall, with the S&P 500 losing 3% since February 21, while Bitcoin has plummeted 16%. The simultaneous decline in stocks and bond yields is unusual and indicates growing risk aversion and economic slowdown fears.
Recent US economic data has shown signs of weakness, including a decrease in consumer sentiment, existing home sales, and manufacturing activity. Trade tensions have also added to market uncertainty, with President Trump announcing plans to impose tariffs on Canada, Mexico, the European Union, and China.
Crypto analyst Chris Rupkey predicts that the economy is heading for a “crash landing” this year due to Washington policies causing consumer loss of confidence. The Fear & Greed Index has plunged to 10, indicating extreme fear in the crypto market.
Some experts believe that a small crisis could be used as justification for quantitative easing and stimulate the economy. However, with the Federal Reserve remaining neutral, it is unclear whether this will lead to interest rate cuts. Despite this, there is hope that a massive wave of liquidity expansion could breathe fresh air into risk-on markets, including Bitcoin.
Liquidity analysts predict that Bitcoin will follow major global liquidity movements, which currently suggest a strong rebound by June if trends hold.
Source: https://cointelegraph.com/news/bitcoin-trump-trade-is-over-will-fed-rate-cuts-and-m2-expansion-help