Financial groceries send mixed signals because uncertainty has reached new highs. In Feb.
Following a historical pattern, the 10-year-old Benchmark of the Treasury responded to the news by falling from 4.4% to 4.29%. While this may seem undoubtedly, markets tend to interpret debt ceiling resolutions as stabilizing events, reducing near-term uncertainty even as they indicate increased line borrowing.
However, stock and crypto markets, which usually benefit from the lower bond yield as the capital revolves around the risk of risk, continued their fall that began last week. Since Feb. 21, the S&P 500 lost 3%, the NASDAQ100 dropped by 5%, and Bitcoin has fallen by 16%. Top Cryptocurrency now trades 26% below the full time reached on President Donald Trump’s inauguration day, effectively deleting the Trump Pump.
A simultaneous decline in stocks and bonds is unusual market behavior and suggests a growing risk of avoidance and fears of slowing the economy.
Economic uncertainty exceeds markets
The recent US economic data released in February. 21 showed well -known signs of weakness. The University of Michigan consumer’s consumer index fell 64.7 in February, down from 71.7 in January. It has marked the lowest level since November 2023 and entered below the initial estimate of 67.8, which is also the agreed forecasting of economists polls of Reuters.
Existing home sales dropped by 4.9%, and the S&P Global Purchasing Managers’ Index (PMI) fell from 52.7 from January to 50.4, the lowest since September 2023. PMI monitors manufacturing and service activity, and the reading is about 50 thresholds separating the expansion from retreating suggests growth in growth in the private sector.
Trade tensions are added to market uncertainty. On February 24, Trump said the tariffs in Canada and Mexico would “go” after the deadline for the month’s delay next week. Trump’s plan to impose 25% tariffs on the European Union, expressed in Feb
As a commentary on CNBC, Chris Rupkey, Chief Economist at FWDBonds, unapologetically Says,
“The economy is about to get the rug out of it because Washington policies cause rapid loss of confidence on the consumer part.”
Rupkey explained, “The economy will come in for a landing this year’s crashing. Glue here. The bond market is.”
In the crypto market, the fear of fear and greed has fallen to 10, or intense fear – a contrast to the levels of greed seen at the beginning of February.
Crypto Fear & Greed Index. Source: alternative.me
A small crisis to justify the amount of easing?
In January, former Bitmex CEO Arthur Hayes haka -haka That a battle with the ceiling of Ut-combined with a reluctance to spend the overall treasury account-can push a 10-year-old wealthy ark of more than 5%, motivating a stock market crash and forcing the Federal Reserve to intervene.
In his view, this will help President Trump force the Fed to adopt a Dovish Standing mode. In other words, a small crisis to justify QE and stimulate the economy.
For Hayes, this mini-crisis must occur in advance of Trump’s presidency, during the Q1 or Q2, so that he can blame it for the action developed during the Biden Management.
“A mini financial crisis in the US will provide the finances of crypto inheritance. It will also be political for Trump. I think we will go back to the past all the time and bring back all Trump’s bumps.”
Especially, even though the debt ceiling was raised with a bit of drama, and the 10-year yield of the ark actually collapsed, the stock market still dropped. The most pressing question today is whether it will lead to reductions in interest rate.
The Fed remains neutral, with recent economic data that provides minimal reason for an imminent policy shift. The latest CPI report on February 11 showed inflation that accelerated 0.5% month-to-month, pushing the annual rate to 3%, both extremely expected. Fed Chair Jerome Powell has emphasized That the central bank will not rush to cut the rates further. Despite this position, a combination of weakening of economic indicators and expansion of liquidity may eventually force the Fed’s hand next year.
Bitcoin and M2 price changes have different speeds
Despite the current market collapse, not all hope is lost, as a massive wave of expansion of liquidity may be at an end. The Expanding M2 Global Liquidity Supply Fresh air can breathe in risk markets, especially Bitcoin. However, this may take some time.
The 3-month offset M2 Global Liquidity Index provides a useful framework for forecasting markets driven by liquidity. This indicator changes the M2 currency supply data by three months to study its relevance to risk assets.
Crypto analyst Crypto Rover has highlights it in X, Says:
“Global liquidity is huge. Bitcoin will follow as soon as possible.”
Bitcoin vs M2 Global Liquidity Index (3M Offset). Source: Cryptorover
History performance shows that BTC usually gets approximately 60 days behind major global liquidity movements. The current drop is written perfectly in this picture, which also promises a strong rebound in June if the liquidity trends hold.
Jeff Park, head of alpha techniques in Bitwise, Echoed The emotion:
“Bitcoin may certainly be less than short term as it has evolved in trend and volatility, both recently. But the wise investors in the institution do not have to catch every wave; they just don’t miss the biggest. And the biggest wave of global liquidity will come this year.”
Jamie Coutts, a crypto analyst from realvision, also shared His views on how the expansion of liquidity affects the price of bitcoin.
“2 of the 3 major liquidity measures in my plot (global currency supply and balance sheets in the central bank) became bullish this month as markets dive. History, it became desirable for Bitcoin. The dollar was the next domino. The confluence was king.”
Macro and Liquidity Dashboard. Source: Jamie Coutts
This article does not contain investment advice or recommendations. Every transfer of investment and trading involves risk, and readers should conduct their own research when deciding.
