Recession panic triggers "Black Monday": double kill for stocks and cryptocurrencies, has Hayes' prophecy come true?

Author: BitpushNews Mary Liu

The bubble of "buying US stocks to earn passive income" seems to be bursting.

Affected by heightened concerns over a potential US economic recession, the US stock market experienced a "Black Monday" on Monday. By the close of trading that day, the Dow Jones Industrial Average had initially fallen by 2%, the S&P 500 index dropped by 2.7%, and the Nasdaq fell by 4%. Tesla (TSLA.O) plummeted by 15.4%, Apple (AAPL.O) dropped nearly 5%, and Nvidia (NVDA.O) fell by 5%.

In the cryptocurrency market, BTC fell below the $80,000 mark for the second time in three weeks, hitting a low of $77,400 within 24 hours, while ETH retraced to around $1,800, with the total cryptocurrency market cap declining by nearly 4%.

Arthur Hayes, co-founder of BitMEX and a well-known figure in the crypto space, seems to be seeing his previous predictions come true. He had predicted that Bitcoin could drop to $75,000, and as market sentiment worsens, this prediction is becoming increasingly credible.

In his latest tweet, Hayes reiterated that Bitcoin could further dip to $75,000 and warned, "If it enters this range, the market will experience severe volatility." He pointed out that the open interest for options contracts around $75,000 has lit up a "red light," indicating extremely pessimistic market sentiment.

A few words from Trump topple the market, casting a shadow over the US economy

US Treasury Secretary Scott Bessent stated in an interview with CNBC on Friday that as the new government cuts spending, the US economy may undergo a "detox period."

Trump also responded to the possibility of an economic recession during a Fox News interview aired on Sunday, stating that the economy is in a "transition period."

Trump said, "I have to build a strong country; you can't just focus on the stock market."

Goldman Sachs has recently significantly lowered its economic growth forecasts due to potential impacts from tariffs, further exacerbating market pessimism regarding the US economic outlook. Data from the New York Fed shows that the one-year inflation expectation for February is 3.13%, and expectations for a worsening financial situation over the next year are the strongest since November 2023.

Sam Stovall, chief investment strategist at CFRA Research, told CNBC, "We are in the growing pains of a man-made adjustment. I call it a man-made adjustment because it is actually a response to the new government's tariff plans or at least the threat of tariffs, and what impact this will have on the economy."

Institutional analysis indicates that if concerns over an economic recession triggered by the trade war come true, the Federal Reserve may begin a series of rapid interest rate cuts starting in June. The futures market has already bet on rate cuts of 25 basis points in June, July, and October.

Tim Duy, chief US economist at SGH Macro Advisors, warned that if the labor or financial markets decline, the Federal Reserve will face a dual risk: dealing with inflation while resisting Trump's pressure for rate cuts. However, whether rate cuts can restore market confidence remains uncertain.

Analysts: Bitcoin must undergo a "mini-recession" before rebounding

Institutional investors are withdrawing from the cryptocurrency market, with crypto investment products experiencing net outflows for the fourth consecutive week. According to data from CoinShares, crypto funds saw outflows of $867 million last week, bringing the total outflow over four weeks to $4.75 billion. Most of the bearish sentiment comes from the US, where investors withdrew $922 million last week.

Zach Burks, CEO of the NFT market Mintology, stated that due to inflation concerns and the waning appeal of Bitcoin as a "Trump trade," Bitcoin could drop to $72,000. He noted, "Many investors are withdrawing from Bitcoin, marking the first time since Trump took office that it is viewed as a high-risk asset."

Burks believes that Bitcoin's failure to decouple from US stocks has caused it to lose its function as a store of value. Instead, investors are turning to traditional safe-haven assets like gold. He predicts that while Bitcoin may rebound to $110,000 this year, the market must first navigate through this "mini-recession" triggered by Trump's policies.

Gregory Daco, an economist at EY, told CNN that the uncertainty and chaos surrounding Trump's policies do not help the overall economic situation. He said, "The current situation is one of policy ambiguity, unclear policy intentions, and undefined policy goals. All these factors combined make investors uneasy, as it is still unclear where policies will ultimately lead."

Therefore, in such an environment, Don't Fight it, Float with It. Before the storm arrives, true wisdom may not be to fight against the current, but to choose to safely drift with the flow and gather strength.