Bitcoin, altcoins, and the stock market are down on Wednesday after a series of weak economic data from the United States.
Bitcoin (BTC) price dropped below $94,000, much lower than this month’s high of $96,000. Similarly, top altcoins like Ripple (XRP), Pepe (PEPE), and VeChain (VET) dropped by over 5% in the last 24 hours.
The total market capitalization of all cryptocurrencies decreased by 3.6% in the same period, falling to $3.03 billion. U.S. stock indices were also in the red, with the Dow Jones Industrial Average was down around 150 points and the tech-heavy Nasdaq 100 fell around 170 points.
US economy shrank in Q1
The drop across risk assets followed the release of multiple weak economic indicators. A report showed that the private sector added just 62,000 jobs in April — well below the average estimate of 114,000 and a steep decline from March’s 147,000.
Another report revealed that the U.S. economy contracted in the first quarter, shrinking by 0.3%. This marked a sharp reversal from the 2.4% expansion seen in Q4 of last year.
Inflation also remained stubbornly above the Federal Reserve’s 2.0% target. The closely watched Personal Consumption Expenditure (PCE) index slowed to 2.3% in March, still slightly higher than the expected 2.2%.
These figures followed a report from the Conference Board, which showed consumer confidence had plunged to its lowest level in years.
As a result, Bitcoin and most altcoins, including Pepe, VeChain, and XRP, fell as investors increasingly predicted a looming U.S. recession. In a statement, Mark Zandi, the senior economist at Moody’s, warned that the economy was on the precipice of a recession.
They also declined after Trump insisted that his tariffs on most goods would go on. In a TruthSocial post, he stated that tariffs would soon begin to take effect. This statement mirrored what he told the Times that he would declare total victory if the US had high tariffs on foreign imports.
Silver lining for Bitcoin and altcoins
On the positive side, higher tariffs on imports may lead to a recession in the US as Mark Zandi predicts. A recession would lead to lower consumer spending and help reduce inflation.
More importantly, if the Federal Reserve responds by cutting interest rates, Bitcoin and other altcoins may benefit. This also explains why U.S. bond yields dropped following the GDP data.
Historically, cryptocurrency prices have rallied when the Fed enters a rate-cutting cycle. For example, Bitcoin and most altcoins surged during the pandemic as the Fed slashed rates to zero and implemented aggressive quantitative easing.
