The pre-and-post-election Trump trade sent Bitcoin to new highs, but the jig is up. Traders now shift their hope to the resumption of QE and expanding global liquidity.
Financial markets are sending mixed signals as uncertainty reaches new highs. On Feb. 25, the US debt ceiling was raised from $36.1 trillion to $40.1 trillion, marking another massive expansion in government borrowing.
Following a historical pattern, the benchmark 10-year Treasury yield reacted to the news by dropping from 4.4% to 4.29%. While this may seem counterintuitive, markets tend to interpret debt ceiling resolutions as stabilizing events, reducing near-term uncertainty even if they imply higher borrowing down the line.
However, the stock and crypto markets, which usually benefit from lower bond yields as capital rotates into risk assets, have continued their fall that started last week. Since Feb. 21, the S&P 500 has lost 3%, the Nasdaq100 has dropped 5%, and Bitcoin has plunged 16%. The leading cryptocurrency is now trading 26% below its all-time high reached on President Donald Trump’s Inauguration Day, effectively erasing the Trump pump.
