The crypto market has been experiencing considerable turbulence this month, extending a downturn that has been observed since the last quarter of the previous year. Current figures show Bitcoin (BTC) has seen a significant decline from its all-time high of $109,300 recorded in January, now standing at approximately $82,000. Meanwhile, Ethereum (ETH) has dropped from $4,100 in November to around $1,800, indicating a substantial fall in value for this major cryptocurrency.

The trend is mirrored across several altcoins, with well-known names such as Solana (SOL), Cardano (ADA), and Polkadot (DOT) each suffering losses in double digits from their peaks achieved earlier in 2024. This widespread downturn among cryptocurrencies appears to be correlated with the recent performance of the U.S. stock market, which is currently undergoing a correction. On Monday, the tech-focused Nasdaq 100 index experienced a drop of 350 points, marking its lowest level since September.

Other major indices, including the Russell 2000, the S&P 500, and the Dow Jones, have all reported declines in excess of ten percent from their highs so far this year. This troubling market behaviour has led to a shift in investor sentiment, with many turning towards safer, more traditional assets.

In stark contrast to the declining values of stocks and cryptocurrencies, gold prices have witnessed a remarkable surge. The precious metal has achieved a rally for five consecutive weeks, currently reaching an all-time high of $3,120. Since the beginning of this year, gold has appreciated by over 20%, accompanied by significant inflows into major gold exchange-traded funds (ETFs) such as GLD and IAUM. Investors are increasingly perceiving gold as a more reliable safe-haven asset amid the rising economic uncertainties.

The ongoing rise in gold prices, juxtaposed with the diminishing values of stocks and cryptocurrencies, suggests a growing market consensus that gold is a superior asset during turbulent times. Speculation is rife surrounding potential economic repercussions stemming from recent tariff announcements made by former President Donald Trump. These tariffs, termed “Liberation Day tariffs,” are seen by some investors as a potential black swan event that could lead the U.S. into recession.

Recently, Trump revealed a 25% tariff on imported vehicles to the United States alongside similar tariffs on imports from Canada and Mexico. His comprehensive plan includes reciprocal tariffs on various nations that engage in trade with the U.S., aimed at boosting domestic investment and reducing the trade deficit. However, the inherent challenge remains that tariffs function like taxes, potentially decreasing consumer spending and pushing the U.S. economy toward recession.

Despite the immediate concerns, there is a silver lining which indicates that a recession might prompt the Federal Reserve to lower interest rates and initiate quantitative easing, potentially reigniting demand for risk assets such as stocks and cryptocurrencies. In tandem, Trump is banking on the Mar-a-Lago Accord, which seeks to devalue the U.S. dollar to enhance the competitiveness of American goods in the global market. A weakening dollar could bolster the performance of gold, cryptocurrencies, and stocks alike.

Source: Noah Wire Services