May 2025 Edition

All the information in this letter is NOT to be considered financial advice; it is the author’s personal view and agreed views of others from their overviews of present markets. This content includes a summary of articles that I believe to be insightful and data that has been verified. The purpose is to provide content that is of interest and relevance to MarginCall.Club members.

Welcome to the May 2025 Edition of the MarginCall.Club FinTech Newsletter

This month, we’ll review the key financial events of April 2025 and explore their potential impact on May and beyond. As always, our goal is to provide you with timely, relevant insights to help you navigate the market effectively.

Financial Market Highlights – April 2025

Stock Market:

  • Dow Jones Industrial Average (DJIA): Closed April at 40,669.36, down 2.2% for the month (from 41,583.90 at the end of March), reflecting ongoing tariff-related volatility and a 400-point drop on April 30 following a weak GDP report.
  • S&P 500: Ended at 5,569.06, down 0.2% (from 5,580.94), with a 9.5% surge on April 9 after Trump’s tariff pause, followed by a 10.5% two-day drop on April 3-4, marking the worst since March 2020.
  • Nasdaq Composite: Closed at 17,446.34, up 0.7% (from 17,322.99), buoyed by a 12.2% rally on April 9, though tech giants like Alphabet (-3.2%), Meta (-2.8%), and Amazon (-3.5%) faced pressure amid trade war fears.

Economic Indicators:

  • GDP Growth: The U.S. economy contracted at a 0.3% annualized rate in Q1 2025, the first decline since Q1 2022, down from 2.4% in Q4 2024, driven by tariff-induced import surges and business disruptions. Economists now project 2025 growth at 1.4%-1.6%.
  • Inflation: April’s core PCE inflation rose to 3.5% year-over-year (up from 2.8% in March), exceeding the Fed’s 2% target, fueled by tariffs and energy costs. Headline CPI climbed to 3.0%.
  • Employment: Unemployment ticked up to 4.2% by April’s end, with job growth slowing to an estimated 200,000 jobs added in April, reflecting tariff uncertainty.
  • Interest Rates: The Fed maintained rates at 4.25%-4.50% in its April meeting, signaling caution due to tariff-driven inflation. Only one 25-basis-point cut is now projected for 2025, likely in September.

Cryptocurrency Update:

  • Bitcoin (BTC): Closed April at approximately $94,082.20, up from $83,201.67 in March, with a low of >$83,000< tested mid-month amid tariff sell-offs.
  • Ethereum (ETH): Ended April at roughly $1,867, $8 down from $1,875.16 April open, tracking broader crypto weakness as risk-off sentiment persisted.
  • Regulatory Developments: The SEC intensified oversight of crypto exchanges, citing tariff-induced inflation as a risk to speculative assets, dampening crypto’s inflation-hedge appeal.
  • DeFi and NFTs: DeFi activity remained muted, while NFT gaming saw a brief spike tied to Minecraft movie buzz, though trading volumes stayed low.

Geopolitical and Macroeconomic Factors:

  • Geopolitical Tensions: Trump’s April 5 imposition of 10% universal tariffs and 145% tariffs on Chinese imports escalated trade war fears, with Canada and Europe retaliating. A 90-day tariff pause on April 9 sparked a market rally, but volatility persisted.
  • Energy Prices: Crude oil (West Texas Intermediate) rose to $71.50 per barrel by April 30, up from $69.05, driven by Middle Eastern tensions and tariff-related supply chain strains.

Key Events to Watch in May 2025

  • Federal Reserve’s May Meeting: Markets seek clarity on the Fed’s response to 3.5% core inflation and potential rate cut delays.
  • Q2 2025 Earnings: Tech and auto sectors will reflect deeper tariff impacts, with Tesla and GM earnings under scrutiny.
  • Crypto Market Resilience: Bitcoin’s ability to hold above $85,000 amid trade war turbulence will shape sentiment, with Ethereum at risk below $1,700.

Market Sentiment and Investment Insights

Cryptocurrency Market:

Bitcoin’s April decline to $74,582.20 reflects intensified risk aversion following Trump’s April 5 tariffs, which triggered a 9.1% S&P 500 sell-off in the first week. Support is now at $75,000-$77,000, with analysts eyeing a potential rebound to $105,000 if tariff negotiations stabilize.

Key Market Threats – May 2025:

  • Tariff Fallout: Ongoing tariffs could further depress GDP growth by 1%-1.5% in 2025, with stagflation risks rising as inflation nears 4%.
  • Equity Volatility: The S&P 500’s proximity to bear market territory (-14% YTD) and Nasdaq’s 19% YTD drop signal persistent turbulence.
  • Crypto Liquidations: A Bitcoin break below $75,000 could trigger liquidations, testing $70,000 support.

Bitcoin Technical Analysis: Cup & Handle Pattern:

Despite April’s pullback, the weekly chart’s cup-and-handle pattern remains intact, targeting $275,000 by Q3 2025. A correction to $70,000-$75,000 is possible if tariff fears intensify, delaying the rally. A $650,000 peak by late September 2025 is plausible if adoption accelerates in May and Bitcoin clears $128K.

Updated Q&A Section

Q: Why are yields spiking, and what’s driving swap spreads in May?A: Key factors include:

  • Tariff-Induced Inflation: The 10-year Treasury yield hit 4.39% by April’s end, up from 4.27%, as markets priced in 3.5% core inflation.
  • Federal Reserve Stance: The Fed’s April “hold” and single projected 2025 cut signal tighter policy, pushing yields higher.
  • Geopolitical Risks: Trade war escalation and oil at $71.50+ maintain elevated risk premiums.
  • Liquidity Pressures: Equity and crypto sell-offs (Nasdaq -4.3% on April 10) drive bond market repositioning.
  • Summary: Yields may peak in Q3 2025 if inflation hits 4%, but a Fed pivot in late 2025 could stabilize markets if Bitcoin and equities recover.

Final Thoughts on Crypto

April’s tariff-driven chaos has tested Bitcoin’s resilience, with its dip to $79,082.20 holding critical support. Global markets remain volatile, with the Dow down 9.9% YTD, S&P 500 off 14%, and Nasdaq down 19%. Cryptocurrencies retain long-term appeal as hedges against trade and fiscal uncertainty.

My Thoughts on the Coming Month

The April tariff escalation has disrupted markets, challenging Trump’s Bitcoin strategy. Here’s my updated take:

Deductions:

  • U.S. Debt Crisis: National debt exceeding $40 trillion faces strain as tariffs curb growth, bolstering Bitcoin’s strategic role.
  • Strategic Loss in 2024: Democrats’ 2024 retreat remains prescient amid economic turbulence.
  • 2028 Comeback Strategy: A Democratic resurgence in 2028 (e.g., Michelle Obama) gains momentum as Trump navigates tariff fallout and the Canada vote result.

Opinions:

Trump’s Bitcoin Strategy:

  • The plan to acquire 1 million BTC over five years is pressured by the $79,000 dip but presents a buying opportunity.
  • Bitcoin as a debt-offset asset retains appeal, though tariff costs may limit funding. Potential Plan:
  • Year 1: Accumulate 200,000 BTC (~$15.8 billion at current prices), leveraging the dip.
  • Mining Push: Subsidize U.S. mining to offset tariff-driven energy cost spikes. Long-Term Vision:
  • By 2028, Bitcoin could hit $1M+ if adoption surges, mitigating debt concerns. Tariff shocks delay but don’t derail this path.

Final Thoughts:

The April sell-off (Dow -1,015 points on April 10) reduces my confidence in Trump’s plan to 50/50 from 55/45, reflecting tariff headwinds. Bitcoin’s hold above $75,000 with a potential bounce to $105,000 remains critical.

Regards,
James