Cryptoverse: As markets question US exceptionalism, bitcoin starts to shine
By Lisa Pauline Mattackal
(Reuters) - It's late to the sell-USA party. But bitcoin is finally reclaiming its place as a big alternative for investors spooked by President Donald Trump's trade war and keen to dump U.S. stocks, Treasuries and the dollar.
After an initial tumble to its lowest levels this year soon after Trump announced his Liberation Day tariffs on April 2, the notoriously volatile bitcoin has slowly clawed back ground. It managed to outperform stock markets in 10 out of 17 sessions in that period, VanEck data shows.
The world's top and original cryptocurrency is now a whisker away from the $100,000 mark last seen three months ago, after a 15% rise in April alone.
By comparison, the S&P 500 slipped around 0.8% in April, the tech-focused Nasdaq Composite eked out 0.8% gains last month, while the U.S. dollar index fell over 4%.
"The most recent price action may have begun to validate the view that Bitcoin is not just the 501st company in the SPX," analysts at research firm Block Scholes said.
Bitcoin is up 33% from its April low in a surprising turn for the cryptocurrency, given how closely it has mimicked the performance of equity markets in periods of market turmoil- particularly the tech sector - over the past few years.
Correlations between bitcoin and other asset classes have also shifted, according to Block Scholes, and bitcoin is the most inversely correlated to the steepness of the Treasury yield curve in over two years.
"Investors are really starting to respond to (bitcoin) as a potential diversifier," said Ben McMillan, chief investment officer at IDX Advisors.
Bitcoin has even outperformed gold's 11% rise since April 2, despite the safe-haven metal's surge to record highs. Measures of bitcoin's expected volatility have dropped to 18-month lows, as per Block Scholes.
"The damage has been done in terms of trust towards the U.S. and dollar assets ... but you can't (diversify) overnight," said Martin Leinweber, director of digital asset research & strategy at MarketVector Indexes.
"What kind of neutral assets do you have? Underlying that is really a supportive shift towards bitcoin and crypto."
Investors have also turned more bullish on digital asset-focused investment products, with roughly $5.5 billion over the last three weeks flowing into those funds, as per CoinShares data, including $1.8 billion in the week through May 3 for bitcoin products.
If changing tariff policies continue to drive a move away from U.S. assets, bitcoin could find its next leg higher, Geoff Kendrick, global head of digital asset research at Standard Chartered Bank said in a note to clients.
"We expect a strategic asset reallocation away from U.S. assets to trigger the next sharp upswing in bitcoin in the coming months," Kendrick said, adding he sees bitcoin hitting a new record high of around $120,000 in the second quarter of 2025.
TOO MUCH, TOO SOON
It's far too early, however, to say bitcoin has severed its ties with macroeconomic developments.
Bitcoin's 30-day correlation to the S&P 500 briefly dipped to 0.45 in early April but has crept back up to 0.87, as per LSEG data, where 1 indicates they are moving in lockstep.
And it still remains some ways away from its January record high.
"I think we'll inevitably see periods going forward where bitcoin's correlation (to risk assets) rises again," said IDX Advisors' McMillan.
"But the key point is, it is starting to take on trading characteristics of its own."
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
29 minutes ago
- Yahoo
Trump's ‘Big Beautiful Bill' Would Slash Medicaid & SNAP: 3 Moves Retirees Should Make Now
President Donald Trump's 'one big beautiful bill' has passed in the House and is now awaiting Senate approval. If passed, Trump's signature bill would extend the tax cuts granted by the 2017 Tax Cuts and Jobs Act and add additional tax cuts. While this might be welcome news to many, the bill also includes changes to Medicaid and the Supplemental Nutrition Assistance Program (SNAP) that could threaten seniors' access to these programs. Find Out: Read Next: 'The 'one big beautiful bill' passed by the House of Representatives, if it were passed into law today, would cut Medicaid and SNAP by a combined $1 trillion,' said Chris Orestis, president of Retirement Genius. 'In addition, because of the increase to federal debt of as much as $5 trillion, the bill would trigger an automatic reduction in Medicare funding of $500 billion,' he continued. 'This would represent the largest cut to social services and health insurance for the poor, disabled, children and the elderly in U.S. history.' Here's a look at the changes retirees can make now to secure care and avoid benefit disruptions if the bill were to pass. Before changes go into effect, check with your healthcare providers to ensure there won't be any interruption to your care if there are cuts to Medicaid. 'Check with your healthcare provider to see if they might cut back on services or cease accepting Medicaid-funded patients, and contact any nursing home where you or a loved one may reside to find out if they will be reducing the number of patients they can support — or even [if they are] possibly planning to close,' Orestis said. Knowing this ahead of time will allow you to find alternative care providers before it's too late. Learn More: If you are reliant on SNAP, start searching for alternatives that may be able to provide food assistance in the event your benefits are reduced or cut. 'Make sure you know where there are local support services through community or faith-based organizations to replace lost access through SNAP,' Orestis said. Many retirees plan to 'spend down' their savings so that they qualify for Medicaid to pay for their long-term care. However, this may no longer be a viable option. 'If you are considering going onto Medicaid for long-term care and are preparing to engage the 'spend down' process to impoverish yourself and get below the poverty level to qualify, you may want to reconsider that strategy, and instead look to leverage private pay resources to pay for your care,' Orestis said. 'If you are on Medicaid, you will primarily be reliant on nursing homes for your care, and their ability to withstand these cuts will be very challenging and up in the air,' he continued. 'If you are private pay, you are in control and can decide where and when you will receive care, such as at home or an assisted living community not funded by Medicaid.' Strategies to stay private pay for long-term care would include long-term care insurance, annuities, a life insurance settlement, a reverse mortgage or VA benefits. Editor's note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on More From GOBankingRates Clever Ways To Save Money That Actually Work in 2025 This article originally appeared on Trump's 'Big Beautiful Bill' Would Slash Medicaid & SNAP: 3 Moves Retirees Should Make Now
Yahoo
an hour ago
- Yahoo
Oil prices hold gains ahead of US-China trade talks
By Colleen Howe BEIJING (Reuters) - Oil prices held on to last week's gains early on Monday as investors waited for U.S.-China trade talks to be held in London later in the day. Brent crude futures were flat at $66.47 a barrel at 0008 GMT. U.S. West Texas Intermediate crude was trading up 1 cent at $64.59. The prospect of a U.S.-China trade deal supported prices as three of Donald Trump's top aides were set to meet with counterparts in London on Monday for the first meeting of the U.S.-China economic and trade consultation mechanism. The announcement on Saturday followed a rare Thursday call between the two countries' top leaders, with both under pressure to dial down tensions as China's export controls on rare earths disrupt global supply chains. Oil prices posted their first weekly gain in three weeks on the news. A U.S. jobs report showing unemployment held steady in May appeared to increase the odds of a Federal Reserve interest rate cut, further supporting last week's gains. Inflation data from China on Monday morning will give a reading of domestic demand in the world's largest crude importer. The economic data and the prospect of a trade deal that could support economic growth and increase demand for oil outweighed worries about increased OPEC+ supply after the group announced another big output hike for July on May 31. HSBC expects OPEC+ to accelerate supply hikes in August and September, which are likely to raise downside risks to the bank's $65 per barrel Brent forecast from the fourth quarter of 2025, according to a research note on Friday. Capital Economics researchers said they believe this "new faster pace of (OPEC+) production rises is here to stay". Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
an hour ago
- Yahoo
China's Rare Earths Weapon Could Kill Europe's Auto Industry
China earlier this year introduced restrictions on its exports of rare earths. The move marked a new stage in the US- China trade spat, when the two sides no longer tried to out-tariff each other but took to more concrete steps. The problem is, the restrictions don't just apply to U.S. companies. And they may well deliver the fatal blow to Europe's struggling auto industry. China controls 90% of the world's rare earths processing capacity. It is the indisputable, if not exactly celebrated in the West, master of the rare earths industry. And now, it is using this position to make a point to trade partners that have gone above and beyond to restrict Chinese exports to their own countries and regions—essentially the same thing that Washington does when it uses the dominance of the dollar to sanction governments it doesn't see eye to eye with. Rare earths are used in a perhaps surprisingly wide variety of products. More specifically, it's rare-earth magnets that are troubling carmakers on both sides of the ocean. 'Without reliable access to these elements and magnets, automotive suppliers will be unable to produce critical automotive components, including automatic transmissions, throttle bodies, alternators, various motors, sensors, seat belts, speakers, lights, motors, power steering, and cameras,' the Alliance for Automotive Innovation, an industry body, wrote in a letter addressed to the Trump administration in early May. The letter, cited by Reuters in a recent report on the rare earths restrictions, is one of what looks like a cry for help that is only going to get louder. It was signed by auto industry leaders including Toyota, Volkswagen, and General Motors, which thanked the administration for trying to resolve the issue. If they didn't, the carmakers said, it would be only a matter of time before car factories started shutting same is happening in Europe, and it's worse—because with Trump, U.S. carmakers no longer have to worry about EVs. With the current European parliament and the Commission, local carmakers do have to worry about EVs, a lot. Because EVs feature greater amounts of those rare earths than internal combustion engine cars. And European carmakers have been mandated with the production and sale of certain minimum numbers of these EVs over the next three years. 'I informed my Chinese counterpart about the alarming situation in the EU car industry — the rare earth and permanent magnets are essential for industrial production… this is extremely disruptive for industry,' the European Union's trade commissioner, Maros Sefcovic, said this week, as quoted by the Financial Times. He added that the 'Carmakers are warning of huge production difficulties in a short period of time.' The clock, in other words, is ticking and China does not really seem in a hurry to stop it. The restrictions that Beijing implemented in mid-April are not literal—or direct. They are in the form of a new licensing regime for anyone who wants to buy rare earth magnets from Chinese producers. To do that, the prospective buyer needs to apply for a license, provide a substantial amount of information, and wait. As a Bosch spokesperson described it, the application process was 'complex and time-consuming, partly due to the need to collect and provide a lot of information.' Because of this complexity, only a few car parts suppliers have been granted such licenses, making the car companies' freak-out only a matter of time, really. But this is coming at a really bad time for European carmakers, despite the substantial rise in EV sales. They are still to turn in a solid profit on their electric cars and they are supposed to be making ever more of these—which means a lot more rare earths. Things are not that swell in the United States, either, after President Donald Trump accused the Chinese of violating a deal the two earlier agreed, on the temporary relaxation of trade warfare, including tariffs and other trade restrictions—only to be slapped back with the accusation that he did that first, by restricting semiconductor exports. Things are not looking good for the car industry right now but there is, as always, a silver lining. It consists in the fact that the world is entirely dependent on a single source of rare earths and this is not a sustainable or secure state of affairs. There has been a lot of talk in both Europe and the United States about building their own supply chains in such critical materials but action has not really been forthcoming. Even if it was, building a supply chain from scratch takes many years—just ask China. Yet the rare earths drama may boost Europe's resolve to actually start working on that supply chain, however long it takes to build it. Import dependence can be fatal. By Irina Slav for More Top Reads From this article on
