Bitcoin Surges 14% to $85,000 Amid Global Economic Uncertainty

Bitcoin (BTC) traders are observing a significant price jump to $85,000, despite the S&P 500 index dropping 5.7% in April. This move follows a 14% rebound from a trade-war induced crash to $74,400. Investors are cautiously optimistic, with multiple events and data points suggesting further gains above $90,000.

Several metrics and events indicate a “decoupling” of Bitcoin’s price from traditional financial instruments. However, skepticism remains as Bitcoin has not matched gold’s performance, which reached an all-time high of $3,358 on April 16. This has led to speculation that governments and central banks are increasing their gold reserves.

As central banks respond to the threat of an economic recession, the chances of an increase in monetary supply are rising. While the US Federal Reserve has held off on lowering interest rates or expanding its balance sheet, other nations have already taken such steps. This puts more pressure on the US economy, which is starting to show signs of weakness.

In China, new bank loans in March rebounded more than expected to $500 billion, over 20% higher than analysts had predicted and a strong recovery from the previous month’s decline. The People's Bank of China has promised to increase stimulus measures to reduce the impact of the trade war with the United States.

On April 17, the European Central Bank cut interest rates for the seventh time in a year to support the eurozone economy. The ECB has lowered the cost of capital to its lowest level since late 2022. Several investment banks have also reduced their inflation forecasts for the region, as the tariff war could reduce the region’s gross domestic product by 0.5%.

Further adding pressure on the US Federal Reserve to end its restrictive monetary policy is the weakening of the US dollar compared to major global currencies, as the DXY Index has dropped to its lowest level in three years. A weaker dollar usually helps exports, which can be positive for the current account balance, but this is unlikely to last during a trade war.

Investor confidence has also been hurt by public criticism of the Fed Chair’s administration. This situation makes it harder for the US Treasury to rely on issuing Treasurys to stay afloat, which further weakens the US dollar. The President even said that the removal of the Fed Chair “cannot come fast enough,” while also calling for lower interest rates.

However, when looking at the current macroeconomic data, there is little reason to support a more relaxed monetary policy from the US Fed, especially after the latest jobless claims reported on April 17. Initial claims fell by 9,000 to 215,000 in the week ending April 12. The Fed Chair repeated on April 16 that the labor market is in a “solid condition.”

Bitcoin miners have also shown a strong long-term commitment, as the hashrate increased by 8% compared to the previous month. Since the Bitcoin halving in April 2024, traders were worried that lower profits would cause many miners to leave, possibly leading to a sell-off, since miners reportedly hold almost 1.8 million BTC.

According to the analyst's forecast, Bitcoin’s decoupling from traditional markets continues to gain attention. This, combined with the global stimulus measures and the weakening US dollar, could drive the price of Bitcoin to $90,000 in April. The long-term commitment of Bitcoin miners also supports this bullish outlook, as they continue to invest in the network despite lower profits.