Market Update - April 25, 2025

Bitcoin outpaces equities amid U.S. Macro repricing

Since former President Trump’s so-called “Liberation Day” on April 2nd, Bitcoin has exhibited notable resilience, sharply outperforming traditional risk assets. Over this period, it has risen 12.4% relative to the Nasdaq, a divergence driven by a rapidly changing macro backdrop that is increasingly supportive of alternative stores of value.

Sweeping new tariffs have catalyzed fears of a global economic deceleration, weighing heavily on corporate earnings outlooks. While U.S. GDP expanded by 2.4% in Q4 2024, the Atlanta Fed’s Q1 forecast now points to a contraction of -2.5%, marking a dramatic pivot in growth expectations. This has triggered a repricing in equity markets. 

In tandem, the U.S. dollar has weakened, and Treasury yields have climbed, reinforcing investor demand for hedges against policy volatility. With limited viable alternatives, capital has rotated into gold and Bitcoin, both of which continue to benefit from mounting global economic and geopolitical tensions.

The resurgence of policy interventionism is also at play. Speculation around an emergency rate cut has gathered pace, amid chatter that Trump may attempt to replace Fed Chair Jerome Powell. Notably, the Trump administration is signaling a legal challenge to the longstanding Humphrey’s Executor precedent, which restricts presidential authority to remove agency heads without cause. This challenge—now progressing through the Supreme Court—could redefine executive control over monetary policy institutions. While still speculative, it has introduced another layer of uncertainty into the Fed’s forward guidance. While he has since backtracked, the political noise has further undermined monetary policy credibility, driving increased demand for assets outside the traditional financial system. 

Bitcoin’s reaction function has been instructive: it is being treated less as a speculative risk asset and more as a hedge against monetary mismanagement.

Fund flows highlight investor sentiment

Investor sentiment has shifted decisively. Digital asset inflows reached US$2.37 billion this week, the strongest since the January 17th U.S. inauguration period. Of this, almost US$1 billion arrived last Tuesday, reflecting renewed institutional confidence. While the basis trade remains muted, these broad-based inflows signal a healthy pickup in directional conviction.

Signs of stagflation risk still there

Recent economic data points to increasing strain on U.S. consumers and businesses:

• Retail sales rose 1.4%, led by pre-tariff auto purchases; control group sales were also firm.

• Unemployment has climbed to 4.2%, with job cuts—particularly government-led—rising to near-record levels although DOGE policy consequences are still unknown

• Challenger layoffs and weakening ISM employment components suggest wage growth may slow further.

Meanwhile, inflation has declined for six consecutive months, but regional manufacturing surveys now point to rising input costs, hinting that the lagged impact of tariffs may soon reverse disinflationary momentum.

The combination of weaker growth, persistent price pressures, and rising unemployment sets the stage for what increasingly resembles a stagflationary environment.