Cryptocurrency Prices Plunge 3.75% Amid U.S.-China Trade Tensions

Cryptocurrency prices experienced a significant decline over the past 24 hours, mirroring a broader sell-off in risk assets. This downturn was triggered by escalating tensions in the U.S.-China trade war, with the White House imposing new restrictions on chip exports to China and threatening up to a 245% tariff on imports from the country. Bitcoin (BTC) led the decline, falling more than 2.2%, while the broader market, as measured by the CoinDesk 20 (CD20) index, dropped by 3.75%.

This decline in cryptocurrency prices comes despite bitcoin's previous resilience amidst the trade war escalations. However, recent metrics suggest that the bull run may have ended. Bitcoin slipped below its 200-day simple moving average on March 9, indicating a potential bear market cycle starting in late March, according to Coinbase Institutional. Additionally, a risk-adjusted performance measure known as the Z-Score shows that the bull cycle ended in late February, with subsequent activity seen as neutral.

Despite the current market conditions, some traders see the resilience of cryptocurrency prices as an opportunity. Jake O., an OTC trader at crypto market maker Wintermute, noted that the stability in prices allows traders to look more seriously at using premium to hedge, supporting the case for allocating into spot. Several prime brokers have also shifted their short-term models from underweight to neutral on risk assets, indicating that the next move will likely be driven by real data.

Upcoming economic data releases, including March retail sales data from the U.S. Census Bureau and a speech by Fed Chair Jerome Powell on the economic outlook, are expected to provide more clarity on the market's direction. Additionally, the U.S. Department of Labor will release unemployment insurance data, and the Census Bureau will provide residential construction data. These events could influence the market's response to the current trade tensions and provide a clearer picture of the economic landscape.

The shakiness in risk assets has benefited gold, which is up around 26.5% year-to-date to above $3,300 per troy ounce, contrasting with the U.S. Dollar Index’s 9% drop. This shift in investor sentiment towards safe-haven assets like gold reflects the uncertainty and risk aversion in the market.