Crypto market mirrors stock declines amid recession fears

The cryptocurrency market has experienced a sharp downturn, with its total market cap dropping nearly 8%, reflecting the worst single-day losses seen in the S&P 500 and Nasdaq since the COVID-19 pandemic.

This decline comes as fears of a U.S. recession intensify, driven by economic uncertainty and President Trump’s tariffs.

Liquidations within the crypto space have surged, exceeding $500 million in the past 24 hours.

Bitcoin (CRYPTO:BTC), which briefly showed stability, fell over 5% during this period, while other cryptocurrencies also faced significant losses.

The Crypto Fear and Greed Index returned to “Extreme Fear,” signaling heightened anxiety among investors.

Traditional markets are also under pressure.

The Dow Jones dropped by 1,600 points, and both the Nasdaq and S&P 500 recorded historic declines.

Analysts attribute these losses to concerns over Trump’s economic policies, which include aggressive tariffs that have disrupted global trade.

Amid this turmoil, crypto assets continue to show strong correlation with traditional financial markets.

Despite its original intent as a hedge against economic instability, Bitcoin remains categorised as a “risk-on” asset, making it vulnerable to broader market trends.

Gold, often seen as a safe haven, has also declined slightly but remains less affected compared to cryptocurrencies.

Market sentiment suggests that cryptocurrencies may face further challenges if traditional markets continue their downward trajectory.

Analysts warn that liquidity pressures during a recession could exacerbate sell-offs in crypto assets due to their ease of liquidation compared to other investments like real estate or bonds.