Week by numbers
Past week has seen a downtrend in the crypto market. The price of the largest cryptocurrency, bitcoin, fell by about four percent, and the price of the second largest cryptocurrency, ether, by about sixteen percent. The total value of the rest of the crypto market (excluding the largest stablecoins) decreased by about seven percent.
As is typical for bearish weeks, the price of the largest cryptocurrency, bitcoin, held its ground slightly better than the rest of the crypto market, which was reflected in the rise of bitcoin dominance. The price of the second largest cryptocurrency, ether, on the other hand, developed not only worse than bitcoin but also than the alt-coin market, resulting in the ETH/BTC ratio plummeting down by as much as twelve percent.
Despite the overall downward week, there were also price increases. Among the tokens of the Kvarn X trading service, the biggest weekly increases came from FLR (+6%), JASMY (+5%), and HBAR (+1%). The week's steepest price decliners, on the other hand, were JTO (-27%), TON (-27%), and EOS (-18%).
Stocks in a Historical Rollercoaster
At the time of the previous Kvarn Pulse newsletter on Thursday, April 3, 2025, the previous day had been what Donald Trump named "Liberation Day", and the United States announced it would impose new, extremely high import tariffs. At that time, with the general market sentiment being somewhat panic-like, we wrote:
“Despite the dramatic response to the news, we refrain from drawing far-reaching conclusions just yet. Yesterday’s tariff announcement can be seen as a dramatic opening move in U.S. trade policy, leaving many questions still open..”
A week later, there are stillmany questions open, but some things have become clear:
- The stock markets showed what their reaction would be if such import tariffs were truly implemented and remained in force as announced.
The S&P 500 index, which was already on a downward trend, fell about thirteen percent in three days. Altogether, the S&P 500 had dropped about 20 percent in just over a month, and it began to appear that this was one of the fastest transitions in history from all-time highs to official bear market levels.
2. The United States revealed that the import tariffs are not intended to remain in force in this form.
On Wednesday, April 9, 2025, Donald Trump announced that “reciprocal” tariffs would be paused for 90 days. An exception to this rule was China, the United States' main opponent in the trade war, whose tariffs were, on the contrary, further increased.
The S&P 500 index reacted to this with nearly a ten percent price rise, which in turn is one of the strongest daily gains of the 21st century.
The movements of the stock markets have thus been quite breathless and historically significant in scale.
If an ordinary retail investor has found it difficult to keep up with the developments, there is no reason to feel bad. The situation has been quite exceptional. Our assessment is that even more exceptional twists and turns may lie ahead..
What's Next?
In our earlier Kvarn Pulse newsletters this year, we have pointed out how the current market situation is particularly characterized by low predictability.
In trade policy, there is a on-going game between great powers, in which especially the United States’ main tactic seems to be precisely to cause uncertainty and confusion. In this case, the difficulty in predictability reflected to investors is not an unwanted side effect, but a deliberately created condition.
The tariff announcement on Wednesday, April 3, brought stock indices down by more than ten percent, and the announcement on Wednesday, April 10, of their freeze brought them almost ten percent back up. Our assumption is that these will not be the last difficult-to-predict twists, but more are coming as the United States and China test whose nerves withstand escalating tensions better. When the world’s great powers consciously want to create uncertainty and doubt, the best reaction for an individual retail investor is to accept that for now, the only certainty is high uncertainty.
In this acknowledged state of low predictability, we still do our best to read what can be interpreted from the market’s current situation.
We first focus on the level reached by the steep price rise seen on Wednesday, April 10.
From the graph below, we can see that despite the strength of the price increase, the S&P 500 index, Nasdaq Composite index, and the price of the largest cryptocurrency, bitcoin, all remained for now below the trend line drawn from the two previous local highs.
This observation can be interpreted to mean that the post-decline price increase might still be just noise in a continuing downward trend. From a technical analysis perspective, surpassing this trend line would be the minimum requirement to question the continuation of the downtrend.
If this trend line were surpassed, the next interesting threshold might be the S&P 500 index’s closing price on Wednesday, April 2, 2025, at 5671 points. This was the last closing price before “Liberation Day”.
If this level were surpassed, it would more seriously warrant considering the possibility that the market had shaken off trade war concerns, and the direction of the stock market could once again be more sustainably upward.
Currently, the distance to this level is still about two percent. A reversal downward before this level would draw a new “lower high” on the price chart and would suggest the continuation of the downward trend.
On the other hand, it is not entirely clear how much room for further decline remains in the stock market below the currently seen level of about 4800 points for the S&P 500 index. This level was already close to the 200-week moving average, which has often acted as a support level in bear markets. Exceptions to this have been seen mainly during the bursting of the IT bubble and during the financial crisis. Falling below this level this time would likely require the U.S. economy to drift into a real recession, which in light of the latest tariff news, again seems a slightly less likely today.
What About Crypto?
So what’s going on in the crypto market amid this market turbulence?
Our key observation remains that the crypto market—and especially the price of the largest cryptocurrency, bitcoin—has in our opinion been astonishingly resilient while the general sentiment in investment markets has neared full panic. Compared to the S&P 500 index, the price of bitcoin has even been in an upward trend over the past month.
In our interpretation, this primarily indicates relative strength. When examining the absolute dollar price, we have to note that the trend line drawn from the previous local highs is still not surpassed.
As noted above, we consider surpassing this trend line a minimum criterion for questioning the downtrend in stock indices, and the same applies to bitcoin’s price. The next interesting level after this trend line would be the local top at the end of March, around 88,500 dollars. Surpassing this level would be a relatively strong signal and would create confidence in a new upward trend.
Within the crypto market, we can currently see alt-coins strengthening against the largest cryptocurrency, bitcoin, which suggests that crypto investors remain optimistic.
In the coming days, this relationship might be one of the most informative metrics for investors to follow. If the recent daily rise in both the stock and crypto markets turns out to be just a “dead cat bounce” before the continuation of the downtrend, it might first be visible as a reversal in the OTHERS/BTC ratio. A shift in capital flows from alt-coins back to bitcoin is often one of the first signs of waning investor risk appetite.
What gives particular value to such signals in the 24/7-operating crypto market is that currently, many rumors, news, and even social media posts by the President of the United States seem to spread while the stock markets are closed. The crypto market, functioning around-the-clock, might in the coming weeks be the first to indicate a change in market sentiment - be either up or down.
With these thoughts, we leave the reader to follow the interesting situation in the crypto market, as the United States has just put part of the import tariffs on hold for the time being.
We’ll be back again next week with the Kvarn Pulse newsletter, so stay tuned!
