On Monday, Bitcoin along with many altcoins continued to experience significant declines as market participants anticipated an economic downturn.
Bitcoin (BTC) fell to a low of $74,428 on April 7, marking its lowest point since November 6, representing a decline of over 31% from its peak this year.
Altcoins faced even steeper losses, as numerous investors exited their positions. Ethereum (ETH) plummeted below $1,500, reaching its lowest level since 2023. Other major underperformers included Berachain (BERA), Zcash (ZEC), Litecoin (LTC), and Maker (MKR).
The current downturn in the cryptocurrency market parallels the decline in the stock market, where the Dow Jones, Nasdaq 100, and S&P 500 each fell by more than 5%, although there had been a recovery by late morning.
The slide in asset prices was prompted by Donald Trump’s insistence on continuing his Liberation Day tariffs, citing significant US trade deficits. This trade conflict has led many analysts, including those from Goldman Sachs, to raise their forecasts for a recession.
Potential for a Rebound in Bitcoin and Altcoins Following Black Monday
Nevertheless, there are two primary reasons to believe that stock and cryptocurrency prices may recover soon. Firstly, there are indications that Trump is willing to negotiate with other nations. In a statement on Friday, he mentioned that Vietnam was prepared to eliminate all tariffs on U.S. products.
Additionally, on Monday, he revealed that discussions were being held with Japan, a key trading ally. Japan is now dispatching a team of negotiators to the U.S., which could potentially pave the way for a significant agreement, possibly involving a purchase agreement.
Given the pressure on the U.S. stock market, it seems likely that Trump will pursue a substantial deal with countries such as China and those within the European Union.
Secondly, there is a possibility that the Federal Reserve will step in, as seen during past unexpected crises like the COVID-19 pandemic and the Global Financial Crisis. Traders are anticipating five interest rate cuts this year, with the possibility of an emergency reduction. An analyst from Bloomberg noted:
“The Federal Reserve may soon have no option but to reduce rates. Tariffs present a worrying potential for inflation; however, if growth falters, the Fed will need to prioritize the economy.”
Thus, a combination of interest rate cuts and trade negotiations may provide the support needed to reverse the current decline in the cryptocurrency market. For instance, Bitcoin and altcoins experienced record highs in 2021 following the Fed’s interest rate reductions and quantitative easing measures implemented during the pandemic.