According to the GDPNow model of the Atlanta Federal Reserve Bank, the U.S. economy may be contracting at the fastest rate since the COVID-19 lockdowns, with the model currently predicting a 2.8% decline in U.S. GDP for the first quarter.

The new forecast is drastically different from a month ago when a nearly 4% growth in U.S. GDP for the first quarter was anticipated.

Although GDP tracking institutions like the Atlanta Federal Reserve may experience fluctuations, multiple economic indicators also suggest a downward trend. If global liquidity tightens and more geopolitical conflicts arise, this could adversely affect the cryptocurrency market.

A decline in GDP could trigger an economic recession attributed to Trump’s policies, referred to as the "Trumpcession." Since the second quarter of 2020, the contraction of U.S. GDP has never exceeded 2.8%, when GDP fell by 32.9% due to global lockdowns from the COVID-19 pandemic.

Changes in the Atlanta Fed's first quarter GDPNow forecast. Source: Atlanta Federal Reserve Bank

The U.S. Census Bureau reported on February 28 that this decline may be due to a record $153 billion trade deficit in January. From December to January, the trade deficit grew by 25.6%, likely due to businesses rushing to import ahead of the first round of tariffs implemented by President Trump.

A survey by the Conference Board on February 25 showed that the consumer confidence index fell from 105.3 to 98.3 in February, marking the largest monthly drop since August 2021.

Consumer spending also decreased by 0.2% in January—despite only declining for 11 days during Trump’s presidency—while investors and billionaire Warren Buffett have reportedly suggested that Trump’s tariffs could exacerbate inflation and harm consumers.

Macroeconomic concerns are believed to be a reason for the recent sharp drop in cryptocurrency prices, with Bitcoin (BTC) and Ethereum (ETH) falling by 10.2% and 21.6%, respectively, over the past two weeks.

Despite Trump’s promise to establish the U.S. as the global "cryptocurrency capital" through measures like creating a crypto strategic reserve, the total market value of the crypto market has shrunk by over $670 billion since he took office on January 20.

Related: Trump reiterates crypto reserve strategy; crypto market rebounds; BitMEX co-founder: empty talk

Not all GDP models are as bleak as the Atlanta Federal Reserve's GDPNow model.

The New York Federal Reserve's model predicted a 2.9% economic growth for the first quarter in its latest update on February 28, while the Dallas Federal Reserve's GDP tracking model forecasted a 2.4% growth on February 27.

The Atlanta Fed's GDPNow model uses a similar approach to the Bureau of Economic Analysis to estimate GDP changes, while the New York Fed's model employs Bayesian estimation and analyzes a broader range of data through filtering techniques.

The Dallas Federal Reserve Bank places more emphasis on state-level data to assess economic growth trends from a more localized perspective.

Related: Solana price drops 45% after Trump token launch; meme coins may be the main reason

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