The Russell 2000 witnessed a significant downturn on Thursday, falling 6.6% to reach a 22.5% decline from its 52-week high. This move marks the official entry of small-cap stocks into a bear market. Wall Street typically uses a 20% drop as the benchmark for this classification. The S&P 500 and Nasdaq also experienced sharp declines, firmly entrenched in correction territory, which occurs when the index drops by 10%. While the Dow Jones Industrial Average is yet to reach that level, it remains hovering just above. This market downturn follows President Donald Trump’s announcement of the most aggressive wave of tariffs in nearly a century. These tariffs have had a disproportionate impact on small-cap stocks, which are more vulnerable to global economic shifts and rising debt costs. 2016’s small-cap rally under the Trump administration is now a distant memory. Notably, these same companies were once seen as beneficiaries of deregulation and tariffs but are currently facing significant challenges from economic softening and high interest payments on their debts, which have increased in recent weeks. The Fed also appears poised to cut rates four times before the end of 2025, as indicated by market analysis, with a corresponding 71% probability. Meanwhile, Bitcoin’s price has also taken a hit, coinciding with the broader selloff in risk assets. Despite its status as an independent asset outside traditional financial systems, Bitcoin saw a decline of around 4%. The Nasdaq and S&P 500 experienced their biggest one-day losses in years, reflecting a sense of unease within markets. Gold, meanwhile, managed to hold up better, with a modest 1% drop. This divergence between gold and crypto has been recurring but is becoming more pronounced. Mike McGlone, senior commodity strategist at Bloomberg Intelligence, suggests that the stock market’s decline, Bitcoin’s performance, and gold’s increase present evidence of Bitcoin being more closely tied to market volatility than it was previously perceived as