Market Update - April 11th 2025

A recurring uncertainty

Volatility has made a dramatic return to markets. The VIX has surged to its second-highest level on record—trailing only the COVID-19 crisis—while the MOVE index, a barometer of bond market volatility, is flashing red at levels not seen in years. This is precisely what transpires when markets are left flying blind, with little clarity on what lies ahead.

Adding to the unease, small business optimism has sharply deteriorated, falling to 97.4 versus expectations of 99. Particularly notable is the steep decline in the “sales expectations” and “good time to expand” components. This suggests that small businesses are growing increasingly anxious about the economic fallout from ongoing trade tariffs. Bankruptcy filings are also climbing at an accelerated pace, now nearing levels observed during both the global financial crisis and the height of the pandemic—indicating that the economic damage from tariffs is no longer theoretical, but well underway.

Consequently, the probability of a U.S. recession has risen to 64%, according to the latest estimates. Could we see an emergency rate cut from the Federal Reserve? While the Fed officially targets inflation and employment, it has long held an unofficial third mandate: market stability. If the trade standoff escalates further, the likelihood of a pre-emptive cut within the next month cannot be dismissed.

Adding to investor confusion, we’ve seen a concerning move in Treasury markets. The 30-year yield briefly touched 5% on Tuesday, marking the sharpest three-day rise in yields since the early 1980s. At the same time, the trade-weighted dollar (DXY) has started to weaken. A rising yield environment alongside a falling dollar is historically unusual—and typically a sign of growing investor concern around policy credibility.

This underscores a new phase in the U.S. market correction: one where markets begin demanding higher risk premia even on traditionally “safe” assets. This shift likely reflects growing reputational risks and perceived policy missteps from the Trump administration.

In contrast, Bitcoin—despite recent price declines—continues to outperform equities over the last 8 days. Notably, the 30-day volatility of FAANG stocks has now surpassed that of Bitcoin. Historically, this kind of divergence tends to precede periods where Bitcoin outperforms equities. It would be premature to extrapolate a trend, but the signs are accumulating.

Debunking the Bitcoin death cross myth

On the topic of technical analysis, we maintain our long-standing view: it is more art than science, and often resembles investor astrology. The recent “death cross” has generated renewed attention, but the data tells a different story. Of the 12 previous death cross events in Bitcoin, the average return one month later is a modest -1.6%. Three months later, however, average returns flip to +3.7%, with only 3 out of 12 periods posting a negative return. Far from being a death knell, the death cross has historically been a poor predictor of downside risk—and, arguably, a better buying signal than a warning.

In the current macro environment, where traditional safe havens are losing their shine, Bitcoin’s relative resilience and independence from conventional policy cycles may increasingly appeal to investors seeking certainty in a landscape defined by chaos.