Bitcoin, Ethereum Prices Extend Losses as Stocks Sag—What’s Next for Markets?

Wall Street slid Monday as investors braced for key inflation data and reassessed Federal Reserve policy, while crypto remained under pressure despite a string of positive regulatory developments. 

Rising trade tensions and concerns over inflation are adding to the risk-off sentiment, with Bitcoin and Ethereum falling alongside equities.

The S&P 500 dropped 2.6%, the Nasdaq-100 lost 3.1%, and the Dow Jones Industrial Average declined 2.2%, as traders moved to the sidelines ahead of this week’s inflation report. 

Nikkei 225 and Hang Seng futures pointed to further losses in Asia, signaling continued global market stress.

Crypto has mirrored that downturn, with Bitcoin falling 5.8% to $76,838 over the previous 24 hours and Ethereum down 11.5% to $1,795, according to CoinGecko data. Both digital assets have fallen 19% and 29% respectively over the past 30 days.

While signs of expanding liquidity could offer relief this year, uncertainty over capital flows and monetary policy have continued to apply pressure to risk assets.

At the same time, President Donald Trump is preparing to sign an executive order aimed at reversing anti-crypto banking policies put in place during the Biden administration, sources told Decrypt on Monday. 

The order is expected to roll back initiatives tied to “Operation Chokepoint 2.0,” a controversial banking restriction that allegedly targeted crypto firms. 

It may also include directives on stablecoin classification and Federal Reserve banking policies, reinforcing the White House’s pro-crypto stance following Trump’s recent push to establish a U.S. Bitcoin reserve.

Investors are now focused on Wednesday’s Consumer Price Index (CPI) report, expected to show a 0.3% rise in February prices, cooling from January’s 0.5% gain. 

The year-over-year CPI is projected at 2.9%, slightly below January’s 3%, while core inflation is forecast to remain at 3.2%, according to MarketWatch data.

Any upside surprise could reinforce expectations that the Fed will delay rate cuts, weighing further on risk assets—including equities and crypto.

Liquidity boom?

While M2 money supply expanded in 2024 and has remained flat this year, uncertainty over the Fed’s next moves and tightening financial conditions have kept risk assets at bay. 

The Fed’s balance sheet has continued to shrink, falling to $6.757 trillion, from April 2022’s near $9 trillion, as part of its ongoing quantitative tightening program. 

While broader liquidity indicators like M2 suggest stabilization, the Fed’s cautious stance on inflation and fiscal restraint in the form of Elon Musk’s DOGE are keeping investors defensive.

Still, some analysts see shifting liquidity conditions that could benefit risk assets in the months ahead. 

Jamie Coutts, Real Vision’s chief crypto analyst, pointed to the U.S. dollar’s sharpest decline since the global financial crisis, helping ease debt costs and inject liquidity into markets. 

“Such declines have heralded much higher asset prices two to three months later, as liquidity tends to act with a lag,” he told Decrypt.

Coutts added that while markets are focused on tariffs and fiscal tightening, many are misinterpreting the spending cuts. 

“When the U.S. government reduces waste, it enables a larger role for the private sector—crucial for developing a growth and innovation-driven economy,” he said. 

This could give the Fed more latitude to implement rate cuts and eventually end QT, particularly as Trump moves to stimulate the economy ahead of the U.S. midterms.

Still, markets will need to contend with continued trade tensions, with U.S. tariffs on China and Canada, slated for next month, raising concerns on a global economic slowdown and driving inflation higher.

With inflation data and the U.S. federal budget report due Wednesday, markets are likely to remain volatile. 

But with Trump pushing pro-crypto policies and liquidity trends shifting, the outlook for digital assets could diverge from broader risk markets, Decrypt was told.