Bitcoin (BTC), altcoins tank after US economy shrinks in Q1, consumer confidence plunges

Bitcoin and major altcoins fell on Wednesday, extending losses after a series of weak economic data from the United States.

Bitcoin (BTC) price dropped below the $94,000 mark, trading at around $93,511 by 07:58 ET (11:58 GMT), further extending losses from this month’s high of $96,000.

The world’s largest cryptocurrency was down over 3% in the last 24 hours. Apex altcoin Ripple (XRP) fell by over 5%, while the total cryptocurrency market capitalization fell by 3.6% in the same period, reaching $3.03 billion.

U.S. stock indices were also trading in the red, with the Dow Jones Industrial Average was down around 150 points and the tech-heavy Nasdaq 100 fell around 170 points.

The declines across major risk assets followed the release of multiple weak economic indicators. A report by payroll processor Paychex and the Conference Board showed that the private sector added just 62,000 jobs in April — well below the average estimate of 114,000 and a steep decline from March’s 147,000.

Another report by the Bureau of Economic Analysis (BEA) revealed that the U.S. economy contracted in the first quarter, shrinking by 0.3%. This marked a sharp reversal from the 2.4% expansion seen in Q4 of last year.

Inflation also remained persistently above the Federal Reserve’s 2.0% target. The closely watched Personal Consumption Expenditure (PCE) index slowed to 2.3% in March from 2.4% in February, but economists had anticipated a decline to 2.2%.

These figures followed a report from the Conference Board, which showed consumer confidence had plunged to its lowest level in years as surging prices and interest rates dampened consumer sentiment.

As a result, Bitcoin and most altcoins, including Pepe, VeChain, and XRP, fell further as investors increasingly predicted a looming U.S. recession.

In a statement, Mark Zandi, the senior economist at Moody’s, expressed concern over the state of the U.S. economy and hinted at the possibility of a recession.

"The decline in GDP in the 1st quarter overstates the economy’s weakness, but it is weak," Zandi said. "The threat of tariffs and DOGE cuts weighed heavily on the economy in the quarter. Most worrisome is the weak growth in consumer spending, and that is despite the boost to buying as consumers used some of their savings to keep spending. We expect the pessimistic outlook for the economy to continue to dampen spending in the months ahead."

However, on the positive side, higher tariffs on imports may lead to a recession in the U.S. as Mark Zandi predicts, which could be a silver lining for Bitcoin and altcoins.

A recession would lead to lower consumer spending and help reduce inflation. More importantly, if the Federal Reserve responds by cutting interest rates, Bitcoin and other altcoins may benefit. This also explains why U.S. bond yields dropped following the GDP data.

Historically, cryptocurrency prices have rallied when the Fed enters a rate-cutting cycle. For example, Bitcoin and most altcoins surged during the pandemic as the Fed slashed rates to zero and implemented aggressive quantitative easing.