Black Friday bloodbath on Wall Street, cryptocurrency market crashes over the weekend, why is Q1 2025 so brutal?

Author: Luke, Mars Finance

At the end of March 2025, the global financial markets experienced a severe turmoil. The U.S. stock market faced a "Black Friday" on March 28, with the S&P 500 index dropping by 1.97%, the Nasdaq index plummeting by 2.7%, and the Dow Jones Industrial Average falling by 715 points, a decline of 1.69%. This downward trend quickly spread to the cryptocurrency market, with Bitcoin (BTC) falling from $84,000 in the afternoon of March 29 to $81,565 in the morning of March 31, Ethereum (ETH) dropping to a recent low of $1,767, and Solana (SOL) hitting a low of $122.68 at 6 PM on March 30.

According to Coinglass data, approximately 70,000 cryptocurrency investors were liquidated in the past 48 hours, resulting in losses of about $200 million. This cross-market chain reaction not only triggered widespread panic but also exposed the fragility of the current economic environment. This article will analyze the reasons behind this crash in depth, combining insights from several authoritative institutions, and discuss the key events investors should pay attention to this week and their potential impacts.

The Crash: From Black Friday to the Chain Reaction of Crypto Weekend

Key Events and Data

The crash of the U.S. stock market began on March 28, "Black Friday." According to Investopedia, on that day, the S&P 500 index fell by 112.37 points to 5,580.94 points, the Nasdaq index dropped by 481.04 points to 17,322.99 points, and the Dow Jones Industrial Average fell by 715.80 points to 41,583.90 points. Tech stocks led the decline, with the seven major tech giants (including Apple, Microsoft, Amazon, etc.) losing about $505 billion in market value, and the Philadelphia Semiconductor Index dropping by 2.95%. This was the largest single-day decline since the U.S. stock market crash on March 10, marking a severe adjustment at the end of the first quarter of 2025.

The cryptocurrency market soon came under pressure. Bitcoin fell from $84,000 on the afternoon of March 29 to $81,644 within 8 hours, a decline of over 3%. It then rebounded to $83,536 at 6 PM on March 30 but failed to maintain the upward momentum, dropping to $81,565 by 6 AM on March 31. Ethereum fell to $1,767, and Solana dropped to $122.68. According to The Block data, the total market capitalization of cryptocurrencies fell from a peak of $3.9 trillion to $2.9 trillion, a decline of 25%, while trading volume shrank from $126 billion after the November 5 elections to $35 billion, a decrease of about 70%.

Market Sentiment and Capital Flow

The synchronized decline of the U.S. stock market and the cryptocurrency market reflects an increasing risk-averse sentiment among investors towards risk assets. Galaxy Research pointed out that Bitcoin is closely linked to tech stocks; during this decline, crypto-related stocks such as MicroStrategy (MSTR) plummeted by 10% on Friday, and Coinbase Global (COIN) fell by over 6%, indicating that panic sentiment spread rapidly. InvestingHaven analyst Taki Tsaklanos believes that Bitcoin's short-term support level is at $77,000, and if it falls below this level, it could trigger larger-scale liquidations.

Causes of the Crash: Multiple Factors Impacting the Market

Macroeconomic Pressures, Inflation Exceeding Expectations, and Declining Consumer Confidence

The U.S. Department of Commerce released the February core PCE price index on March 28, showing a month-on-month increase of 0.4% and a year-on-year increase of 2.8%, both exceeding market expectations of 0.3% and 2.6%. Goldman Sachs noted in a research report on March 31 that this data indicates persistent inflationary pressures, which could push the core PCE up to 3.5%, and downgraded the 2025 GDP growth forecast from 1.5% to 1.0%, while raising the probability of a recession from 20% to 35%. The University of Michigan's Consumer Confidence Index fell to 57, the lowest since 2022, with consumer inflation expectations for the next year rising to 5%, and the five-year expectation reaching 4.1%, both at multi-decade highs.

Statements from Federal Reserve officials intensified market concerns. Boston Fed President Collins stated that "maintaining high interest rates for a longer period is appropriate," while Richmond Fed President warned that tariffs could lead to "more persistent inflationary shocks." Goldman Sachs analysts believe that inflation exceeding expectations has weakened rate cut expectations, leading capital to flow into safe-haven assets, becoming a significant driver of the market decline.

Policy Uncertainty: Panic Triggered by Trump's Tariff Measures

The "reciprocal tariff" policy planned by the Trump administration to be announced on April 2 is a core catalyst for this crash. Goldman Sachs expects tariffs to average 15% on all trading partners, a 5 percentage point increase from previous expectations, which could raise import costs and trigger global retaliatory actions. Evercore ISI senior strategist Matthew Aks warned, "If other countries take retaliatory actions, it could lead to the risk of tariff escalation, further undermining market confidence." State Street Global Advisors Chief Investment Strategist Michael Arone pointed out, "Uncertainty continues to plague the market, and next week could become a peak of volatility."

Investopedia cited expert opinions stating that the tariff policy not only raises inflation expectations but could also weaken corporate profitability and consumer spending, particularly impacting the technology and automotive sectors. Freedom Capital Markets Chief Global Strategist Jay Woods stated, "As major events approach, investors tend to avoid risks, leading to intensified weekend sell-offs." X platform user @White7688 also mentioned, "BTC is influenced more by external funds from ETFs, resembling tech stocks rather than safe-haven assets."

Capital Flow and Market Linkage

The U.S. stock market's "Black Friday" triggered a chain reaction in risk assets. Nasdaq data shows that the correlation between the Nasdaq index and Bitcoin reached 0.67 at the beginning of 2025, with its 2.7% decline quickly transmitting to the crypto market. Bloomberg commodity strategist Mike McGlone analyzed, "If the S&P 500 continues to weaken, Ethereum could drop to $1,000, and Bitcoin may test $72,000." Gold prices hit new highs, and the yield on the U.S. 10-year Treasury bond fell from 4.369% on Thursday to 4.254% on Friday, indicating a faster flow of funds into safe-haven assets. Crypto-related stocks like MicroStrategy fell by 11%, and MARA Holdings dropped by 11%.

The Block noted that the end-of-quarter capital rebalancing, combined with next week's "super risk week" (April 2 tariff announcement and April 5 non-farm payroll data), prompted investors to adjust their positions in advance to avoid risks, shifting funds from risk assets to gold and U.S. Treasury bonds. Galaxy Research analyst Alex Thorn believes, "The shrinking trading volume may signal greater volatility ahead, as reduced liquidity will amplify price impacts."

Inherent Market Risks: Leverage and Shrinking Trading Volume

InvestingHaven predicts that if Bitcoin falls below $77,000, it could trigger about $300 million in long liquidations, further exacerbating the decline. The Block analyzed that trading volume has dropped from a peak of $126 billion to $35 billion, indicating that market participants may be waiting for regulatory clarity, lacking buying support in the short term.

Key Events for Investors to Watch This Week

As the market enters early April, investors should closely monitor the following key events, which may further impact the trends of the U.S. stock and cryptocurrency markets:

· April 2 (Tuesday): Overview of Trump's "Reciprocal Tariff" Policy Announcement: The Trump administration plans to announce an average 15% tariff on all trading partners. Goldman Sachs expects this move to raise import costs and potentially trigger global retaliatory tariffs. If the tariff measures are as severe as expected, the U.S. stock market could decline by 3%-5%, and Bitcoin may fall below the $80,000 support level; if the policy is less stringent than expected (such as excluding the semiconductor and automotive industries), the market may experience a brief rebound, with Bitcoin likely rising to $85,000. Evercore ISI's Matthew Aks noted, "The market's reaction will depend on the timing and targeted industries of the tariffs."

· April 3 (Wednesday): Overview of the ECB's March Monetary Policy Meeting Minutes Release: The European Central Bank will release its March meeting minutes, which may reveal the latest assessment of the Eurozone economy and inflation, as well as whether to accelerate rate cuts. If the minutes show a dovish tendency (such as further rate cuts), it could boost global risk assets, and the crypto market may follow the U.S. stock market's rebound; if a cautious stance is maintained, it could exacerbate risk-averse sentiment, suppressing Bitcoin and Ethereum prices. State Street's Michael Arone believes, "The ECB's policy direction will influence global liquidity expectations."

· April 4 (Thursday): Overview of Federal Reserve Chairman Powell's Speech: Powell will speak on the U.S. economy and monetary policy, potentially addressing inflation data and tariff impacts. If Powell signals rate cuts (such as in response to economic slowdown), the U.S. stock and crypto markets may rise by 2%-3%, with Bitcoin possibly breaking through $83,000; if he emphasizes maintaining high interest rates, it could intensify selling pressure. Bloomberg analyst Mike McGlone warned, "Powell's tone will directly impact the short-term trends of risk assets."

· April 5 (Friday): Overview of U.S. Non-Farm Payroll Report Release: The March non-farm payroll data will reveal the health of the U.S. labor market, with market expectations for new jobs below 200,000 and the unemployment rate possibly rising to 4.2%. If the data is weak (new jobs below 150,000), it will strengthen rate cut expectations, benefiting the U.S. stock and crypto markets, with Bitcoin potentially rebounding to $86,000; if the data is unexpectedly strong, it could push up U.S. Treasury yields, pressuring risk assets. Goldman Sachs expects, "The non-farm data will be the climax of market volatility this week."

· April 5 (Friday): Overview of Microsoft's 50th Anniversary Celebration and Copilot Update: Microsoft will celebrate its 50th anniversary and may announce significant updates to its AI assistant Copilot. If the updates exceed expectations, it could boost confidence in tech stocks, with the Nasdaq index potentially rising by 1%-2%, indirectly uplifting crypto market sentiment; if the updates are lackluster, the impact will be limited. InvestingHaven's Taki Tsaklanos believes, "The performance of tech stocks will provide a barometer for the crypto market."

Institutional Perspectives and Market Outlook

Goldman Sachs: Rising Risk of Economic Recession

Goldman Sachs significantly raised its tariff expectations for 2025 in a research report on March 31, predicting an average tariff rate increase of 15 percentage points, core PCE inflation rising to 3.5%, GDP growth slowing to 1.0%, and the unemployment rate climbing to 4.5% by the end of the year. The firm raised the probability of a recession within 12 months to 35% and expects the Federal Reserve to cut rates three times in the second half of the year to address growth pressures. Goldman Sachs analysts noted, "Consumer and business sentiment is weak, and the economy is entering a fragile phase, with the impact of policy risks greater than in recent years."

Galaxy Research: The Crypto Market Still Has Potential

Galaxy Research predicts that Bitcoin could reach $185,000 in 2025, and Ethereum could exceed $5,500, provided that the regulatory environment improves and institutional adoption deepens. Analyst Alex Thorn believes, "Short-term volatility is inevitable, but in the long run, Bitcoin will outperform the S&P 500 and gold." The institution also expects the assets under management of U.S. Bitcoin ETFs to exceed $250 billion by the end of 2025.

InvestingHaven: Technical Support and Risks Coexist

InvestingHaven analyst Taki Tsaklanos stated that the long-term bullish pattern for Bitcoin remains unchanged, with $77,000 as a key support level; if it holds, a rebound may occur in May. However, if it breaks below, it could test $70,000. Analysts warned, "The market must respect the 50% Fibonacci retracement level, or else bullish expectations will fail."

Bloomberg and Evercore ISI: Short-Term Volatility Intensifies

Bloomberg strategist Mike McGlone believes, "The high correlation between Bitcoin and the Nasdaq 100 makes it more like a high-beta asset, likely to follow the U.S. stock market further down in the short term." Evercore ISI's Matthew Aks pointed out, "The tariff announcement on April 2 is an important milestone, but uncertainty will not be eliminated all at once; the market needs to be wary of the chain reaction of retaliatory tariffs."

Conclusion and Future Trends

The recent "Black Friday" and the cryptocurrency weekend crash are the results of macroeconomic pressures, policy uncertainty, capital flows, and inherent market risks acting together. In the short term, the announcement of the tariff policy on April 2 will become a key turning point; if the measures are severe and trigger global trade frictions, Bitcoin may fall below $80,000, and the U.S. stock market may further decline. However, the expected rate cuts from Goldman Sachs and the institutional adoption mentioned by Galaxy Research may inject momentum for a market rebound.