S&P 500 Drops Amid Trump’s Tariff Announcement, But Bitcoin Remains Resilient

The S&P 500 suffered a major blow on Thursday, dropping 4.02% in the wake of President Trump’s declaration of fresh tariffs.

This sharp downturn is now among the index’s most substantial declines in recent times. Indeed, during the still-young 2020s, no fewer than five days have marked worse performances than this one. The most significant of these bad days include:

– March 16, 2020: -11.98%

– March 12, 2020: -9.51%

– March 9, 2020: -7.60%

– June 11, 2020: -5.89%

– September 13, 2022: -4.32%

After investors processed the announcement of new tariffs, worries about international trade and global economic relations sent the stock market into a tailspin and led to a sell-off. Although many different parts of the economy took a hit from the announcement, the stock market’s losses certainly reflect a broader concern for the overall health of the global economy.

Even with the stock market’s ups and downs, the cryptocurrency scene has somehow stayed strong. It’s usual to see cryptocurrencies like Bitcoin (BTC) just following the main market moves, but during these trade-policy-induced market wobbles, Bitcoin’s been even more resilient and has been making its own moves. Its decentralized, borderless nature makes it more insulated from these trade turmoil-induced market shifts.

Despite traditional markets suffering from global economic instability tied to Trump’s tariff announcement, Bitcoin has remained relatively unscathed. As of this past Thursday, Bitcoin was trading at a price of $81.9K. This indicates a swiftness in recovery for Bitcoin, considering that it had just seen a $77.0K local bottom around three weeks ago (on May 23). In fact, Bitcoin was up over 6% in the last week alone. This price stability is in sharp contrast to the declines seen in the stock market.

One reason that Bitcoin and other cryptocurrencies are largely unaffected by tariffs is that they are intangible assets that exist without borders. Unlike traditional stocks, which are often linked to particular companies that engage in international trade, cryptocurrencies like Bitcoin operate in a way that allows them to be largely untouched by such taxes. Their global nature makes them more akin to precious metals, which also are not wallets for trade tax collectors.

Bitcoin’s relatively stable performance during the recent sell-offs in the stock market underscores its potential to act as a hedge against old-fashioned market volatility. While cryptocurrencies are still highly speculative assets and can experience their own fits of volatility, they are not directly subject to the sorts of political decisions that these days seem to be causing the stock market to wobble up and down (e.g., decisions about trade tariffs and import/export restrictions). This has made Bitcoin an especially attractive “store of value” for some investors who want to put their money somewhere that isn’t closely tied to the performance of traditional capital markets.

When tariffs were announced by Trump, it sent several waves through the stock market and became a major topic of conversation among pundits and investors, to be sure. But was the immediate market reaction—especially the sharp drop that ensued—really justified? Is the world on the brink of a new trade war? And how might all this impact the already tenuous state of the global economy?

The S&P 500’s 4.02% drop today is the latest in a string of losses for the broader market, reflecting a rising tide of investor uncertainty. In addition to fretting over tariffs, investors are starting to worry a lot more about inflation, rising interest rates, and the potential for some kind of economic slowdown. While the S&P 500 is nowhere near its pandemic-era lows, its performance today was one of the worst trading days it’s experienced in recent memory, and it really underscores how fragile traditional markets are in the face of all this political volatility.

The cryptocurrency market has been far more stable than the stock market in recent weeks. Its traditional counterpart has suffered through some volatile periods. Bitcoin’s ability to hold above $80K in a time of not just turbulence but outright economic storm all over the globe speaks to a growing maturity of the crypto market.

Besides this innate strength, the global transformation toward digital assets is playing an increasingly prominent part in the rising robustness of Bitcoin. More and more institutional investors are now including Bitcoin and other cryptocurrencies in their diversified portfolios, while retail investors are continuing to perceive crypto as an alternative store of value, not to mention an up-to-now highly effective hedge against the not-so-traditional price volatility of today’s financial markets.

In spite of being fairly protected from tariffs, Bitcoin is nevertheless influenced by the overall state of the economy. When events of global economic concern push toward a tipping point, we are accustomed to seeing sell-offs not just in traditional protective assets, like gold, but also in cryptocurrencies, which appear to many as nothing more than speculative investments. However, the recent sell-off in the stock market has not been mirrored in the Bitcoin market. On the contrary, the price of Bitcoin has risen significantly since the stock market began its recent slide.

The recent split between the performance of Bitcoin and that of traditional assets, such as the S&P 500, raises elemental questions about the future of cryptocurrencies in the global financial system. As central banks and governments across the world work to solve problems like inflation, trade imbalances, and supply chain snags, the fact that Bitcoin appears increasingly immune to these sorts of pressures makes it a more attractive option for investors searching for diversification and long-term value preservation.

Though they still face plenty of problems — including court fights over whether they are securities, market volatility, and recent episodes of very bad public relations — cryptocurrencies such as Bitcoin performed better than stocks during the recent downturn. Also, they typically have gone up in value when stocks have gone down over the past several months, suggesting that they are diversifying the investment landscape in a way that could be very positive for investors.

Currently, both the stock market and the cryptocurrency market have the attention of investors as the effects of Trump’s tariffs are starting to be felt. Investors have to realize that their investment decisions are now being influenced by politics. If stocks and traditional assets are facing political pressure, then the escape clause may be Bitcoin, which is acting like a proven hedge. Yet, even as I write this, Bitcoin is in the process of shedding over 10 percent of its value.

Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.

Follow us on Twitter @themerklehash to stay updated with the latest Crypto, NFT, AI, Cybersecurity, and Metaverse news!

The post S&P 500 Drops Amid Trump’s Tariff Announcement, But Bitcoin Remains Resilient appeared first on The Merkle News.