Cryptocurrencies Drop 2% as Beijing Announces Tariffs

Major cryptocurrencies experienced a reversal in gains following Beijing's announcement of retaliatory tariffs in response to President Donald Trump's decision to impose additional levies on various nations. Bitcoin, for instance, dropped from $84,600 to $83,000, although the decline appeared limited. This is likely because the market's worst fears have materialized, and markets generally prefer certainty over lingering uncertainty.

Since Trump took office on January 20, the threat of tariffs and a potential global trade war has dampened investor risk appetite, causing the price of Bitcoin to tumble from a record high over $109,000 to below $80,000 last month. This week, Trump announced sweeping tariffs on 180 nations, with higher levies on China, the European Union, and Southeast Asia. The effective U.S. tariff rate is now above the level set by the 1930s Smoot-Hawley Tariff Act.

This so-called tariffagedon moment marks the end of lingering uncertainty and could be liberating for markets. Bond yields have dropped across the advanced world in the aftermath, pricing in disinflation. This is contrary to the popular narrative that tariffs would lead to stagflation—high inflation plus low growth—forcing the Fed to keep interest rates elevated. The yield on the benchmark U.S. 10-year bond yield has dropped below 4% for the first time since October, and yields have fallen sharply in the U.K., Germany, and Japan. Additionally, oil has declined sharply this week on prospects of higher supply from OPEC countries.

All this bodes well for Fed rate cut bets and risk assets, including cryptocurrencies. The same can be said for Friday's March jobs report, which, if it beats estimates, will likely be seen as backward-looking, failing to account for this week's Trump tariffs, while a weak print will only add to Fed rate cuts. With the major macro uncertainty behind us, the crypto market could return to focusing on positive developments, such as USDC issuer Circle's IPO filing and technological advancements.

On Thursday, Coinbase Derivatives submitted documentation to the CFTC to self-certify futures for XRP. In addition, Ethereum developers chose May 7 as the date for the Pectra upgrade to go live on the mainnet. Elsewhere, the SEC acknowledged Fidelity's filing for a spot exchange-traded fund tied to SOL, which takes it closer to approval. A lot is happening within the industry, so stay alert!