Market distortions: Bitcoin price between stable support and uncertain financial markets in the shadow of Trump's economic policy

Market distortions: Bitcoin price between stable support and uncertain financial markets in the shadow of Trump's economic policy

Current developments on the financial markets: Bitcoin price under pressure?

The financial markets have been on a downward trend for several weeks, while the Bitcoin price remains in an uncertain situation. The 200-day trend has established itself as stubborn resistance after the price fell below this level two weeks ago. At the same time, the round mark of $80,000 is proving to be robust support for Bitcoin.

Political disputes: Trump vs. Powell

A key factor affecting markets is the divergence between the Trump administration and the US Federal Reserve. The Trump administration is pursuing an aggressive economic policy characterized by rigorous tariff measures and reductions in bureaucracy. In contrast, the Fed has remained cautious and refused to comply with Trump's demands for a rate cut.

This politically-related uncertainty has had a negative impact on the mood on the financial markets. Trump's unclear customs policy increases the risk for companies and investors because there is a lack of planning security. In his recent comments, the president suggested that a mild recession could be tolerated to achieve long-term economic benefits. Many analysts suspect that Trump wants to put pressure on the Fed to promise interest rate cuts and thus have a stimulating effect on the economy.

Risks from high government spending

Finance Minister Scott Bessent recently highlighted the risk of a possible financial crisis due to high government spending. He described current fiscal policy as “unsustainable,” adding to the justification for Trump’s tough stance. The creation of the Department of Government Efficiency under the leadership of Elon Musk is intended to reduce jobs and expenses. Still, the U.S. budget deficit rose to more than $1 trillion in February.

Both politicians do not rule out a recession, which adds to the uncertainty in the markets. Bessent believes the recent corrections are healthy and compares them to the 2008 financial crisis to highlight the risks of unbridled growth.

Fed faces challenges

Trump's policies are putting pressure on the Federal Reserve to cut interest rates. In recent weeks, US 10-year bond yields have fallen, indicating a flight to safety. Forecasts indicate an increasing probability of a recession, which further unsettles the markets. Rate cuts are already expected in 2025, but Fed Chairman Jerome Powell is unlikely to announce any rate cuts in his upcoming decision.

A significant problem is that Trump's policies are distorting economic data, making the Fed's planning difficult. However, falling inflation rates could be driven up again by new import tariffs.

Is a crisis foreseeable?

If the Trump administration sticks to its tariff policy, the economy and markets could suffer further damage. In such a case, the Fed would be forced to act to avoid a systemic crisis. The debt crisis in the USA also requires lower interest rates in order to achieve long-term stability.

Ultimately, it depends on the Fed how quickly it takes measures to support the market. Current economic policies may cause short-term pain, but promote real growth in the long term. Nevertheless, the debt crisis is unlikely to be solved without monetary policy interventions.

Effects on the Bitcoin price

Liquidity remains the main driver for the Bitcoin price. Although new liquidity is likely, it remains to be seen how long the Federal Reserve will maintain its policies. This will have a significant impact on the duration and intensity of a possible bull run as well as the markets' correction potential. Given the existing uncertainties, investors must prepare for further volatility.