"Trade War Escalation: Impact on Crypto and Stocks"

Crypto, Stocks Enter 'New Phase of Trade War' as US-China Tensions Rise

Cryptocurrency and equities markets have entered a new phase of the trade war as tensions escalate between the United States and China. The ongoing tariff escalations have heightened global trade war concerns, particularly after the White House announced on April 15 that Chinese imports would face tariffs of up to 245%.

The latest penalties include a 125% reciprocal tariff, a 20% tariff to address the fentanyl crisis, and Section 301 tariffs ranging from 7.5% to 100%, according to the White House.

Fact sheet on tariffs, investigation into security risks posed by US reliance on imports. Source: White House

Aurelie Barthere, principal research analyst at the crypto intelligence platform Nansen, commented that crypto, tech stocks, and other expensive assets are now in a new phase of the trade war. The focus is on high-added-value sectors like Tech and Pharma, particularly zeroing in on US-China relations.

"Until and IF we see a resolution of the US-China conflict, we are facing highly correlated risk assets."

Barthere added, "I also think this situation is negative for non-US equities," highlighting the high correlation between US equities and crypto since November 2024. This correlation has increased to the downside during the current market correction as investors de-risk, especially with expensive assets.

BTC, SPX, Nasdaq, gold chart. Source: Cointelegraph/TradingView

The recovery of global equities and cryptocurrency markets will depend on the tone of global tariff negotiations. Nansen analysts previously predicted a 70% chance of hitting bottom by June 2025 before a potential recovery.

China recently appointed Li Chenggang as the new chief trade negotiator, known for his intense negotiation style and experience in dealing with US officials during the Trump administration's first term.

Eyes on Powell's Next Move

With escalating tariff tensions and inflation-related concerns, all eyes are now on US Federal Reserve Chair Jerome Powell's upcoming speech at the next Federal Open Market Committee (FOMC) meeting on May 6.

Analysts from Bitfinex exchange highlighted the market's sensitivity to any signals from the Fed regarding rate cuts or geopolitical risks. A hawkish stance from Powell could lead to downside for risk assets like Bitcoin.

"A neutral or balanced tone may calm markets more than they already have over the past week, with some significant recoveries across many risk assets and particularly crypto."

The analysts noted that crypto reacts to macro news not due to changed fundamentals but because of thin positioning and sensitive confidence levels.

As the trade war dynamics evolve, the market remains on edge, closely watching for developments that could impact crypto and stock markets in the coming months.