Bitcoin Drops 7.34% Amid US-China Trade Tensions

Bitcoin has experienced a decline in April, surrendering most of its gains from the first quarter as global markets react to escalating trade tensions between the US and China. This move is part of a broader asset repricing, with Treasury yields falling, oil prices collapsing, and equities entering correction territory.

Since the announcement of tariffs, oil prices have collapsed by 20.92 percent, while the S&P 500 (SPY) fell by 10.23 percent and Bitcoin dropped by 7.34 percent. Bond prices also declined, with US10 and CN10 down by 2.42 percent and 2.58 percent, respectively, reflecting upward pressure on yields. Gold, traditionally a safe haven, retreated by 2.83 percent, indicating liquidity stress and risk-off sentiment across asset classes.

Bitcoin’s relative positioning, down less than SPY and oil but more than bonds and gold, shows that despite strategic reserve narratives, it remains partially tethered to broader macro volatility under acute market stress. This is evident in the overall performance of Bitcoin since the November 2024 US election, where it is up by 11.51 percent, closely trailing gold at 11.09 percent. Both assets have held ground as traditional markets repriced sharply, with SPY declining by 14.42 percent and oil prices collapsing by over 20 percent, highlighting widespread macro stress.

The majority of the drawdown followed the declaration of a national emergency over trade deficits and the subsequent imposition of a 104 percent tariff on Chinese imports by President Trump. China responded with an 84 percent tariff on US goods, a move described as non-negotiable. This escalation has led to a shift in market expectations, with a projected 0.9 percentage point decline in real GDP for 2025 and an expected additional cost of $3,800 for the average household from the tariff regime.

Despite favorable long-term policy framing, Bitcoin has not escaped volatility tied to global liquidity and demand concerns. Institutional allocators appear to be reducing exposure to beta-sensitive assets, including crypto, as recession odds rise. The probability of a global recession is now placed at 60 percent, up from 40 percent before the April announcements. Prolonged tariffs may contribute to persistent inflation, asset volatility, and reduced investment confidence.

While US Treasury yields have reversed sharply, China’s sovereign bond market is reflecting different stress signals. The China 10-year yield is down to 1.65 percent, dropping 65 basis points year over year. These moves imply deflationary pressure, weak external demand, and limited domestic growth rebound potential. China’s GDP forecast has been cut from 4.7 percent to 4.2 percent for 2025, with US tariffs expected to reduce Chinese exports by nearly a third, reducing total exports by 4.5 percent and dragging growth by over a percentage point.

With both Western and Chinese sovereign curves pricing in downside growth risk, Bitcoin’s role as a global reserve hedge becomes more complicated. Institutional portfolios may hold back on discretionary allocation until liquidity stabilizes or policy clarity returns. The structural narrative surrounding Bitcoin as a geopolitical hedge, inflation buffer, or programmable reserve asset remains intact. However, in periods of macro stress, correlations tend to increase across all risk markets. The latest price action indicates that Bitcoin is not yet viewed as a risk-off asset under liquidity duress.

BTC may still find policy tailwinds if the administration accelerates Bitcoin-native initiatives, introduces digital treasury issuance, or formalizes sovereign Bitcoin holdings. Until then, market participants are trading the asset through a macro lens. Price behavior remains closely tied to risk conditions, recession modeling, and cross-asset liquidity. Brent crude oil has fallen more than 20 percent since late March, with forward spreads narrowing and surplus pricing increasing. Consumer retrenchment, reduced export demand, and pressure on manufacturing margins all feed into broader market repricing.

Bitcoin, as part of the broader allocation spectrum, remains sensitive to these shifts. Year-to-date, Bitcoin is one of the worst-performing assets, second only to oil. The divergence illustrates how Bitcoin and gold have so far absorbed trade war volatility more effectively than oil, equities, or sovereign debt markets, suggesting that Bitcoin has drawn relative strength even as global liquidity deteriorates. However, no asset can compare to gold in 2025, which is up by 16 percent.