I previously mentioned that until tariffs are confirmed, the strength of the rebound may not be particularly strong. Recently, everyone was quite pessimistic, and when it hit around 93,000, many felt it had reached the bottleneck of a rebound. However, the market has not pulled back; instead, it has continued to rise and reached as high as 97,000, just a shudder away from 100,000, giving a sense of nearing a return to the peak.
I still feel that the possibility of a reversal at the moment is low; the fundamental conditions are not mature. It has been a month since the tariff negotiations began, and there has been no progress, with no country reporting any substantial breakthroughs in the negotiations. There is almost no news about changes in tariff rates. The situation between China and the U.S. is filled with various smoke screens; I have never seen such a peculiar negotiation.
With tariffs undecided, everything else remains unresolved. Inflation, supply chains, employment, recession, global economy, monetary policy, U.S. stocks, U.S. dollar, and U.S. bonds are all in limbo. You can refer to the simple mind map of tariff impact analysis below. Tariffs are indeed a matter that affects everything. The Great Depression of the 1930s was caused by a tariff war, showing how severe the impact of a tariff war can be.
Can Bitcoin rise independently in an environment where tariffs are undecided? It is still somewhat difficult. The cryptocurrency is already strong enough, but it still does not reach the safe-haven attributes of gold. It is still more of a risk asset. If the global economy enters a recession and everyone is unable to make money, the funds invested in such alternative assets will inevitably decrease; this is a certainty. Although the relationship between crypto assets and the tariff war is not as tightly linked as in traditional capital markets, tariffs impact global economic connections and will not prevent cryptocurrencies from operating as a relatively independent global economic mechanism. In fact, cryptocurrencies may gain good development space in the environment of a tariff war due to this independent advantage. However, if the global economy is poor, it is hard to imagine a risk asset achieving particularly good gains. Poor economic conditions lead to low investment sentiment, conservative investment preferences, reduced investment expectations, and a lower proportion of investment in risk assets, all of which will restrict the growth of risk assets.
Looking at the changes in the fundamentals over the past two weeks, one significant point is that investment sentiment is relatively stronger than when the cryptocurrency was over 70,000, reaching the greed zone. U.S. stocks have also rebounded significantly, and Trump and Bessent have continuously lowered panic in the market, energizing everyone. Emotionally, there has indeed been some relief.
However, there are also many negatives. One is that the GDP for the first quarter is -0.3%, indicating a recession without a doubt. Fortunately, many institutions had already prepared the market in advance, so the market reaction has not been very intense. But it should be noted that this achievement was made before the tariff war escalated. The high tariffs on China starting in April will likely make the GDP for the second quarter look even worse. If there are two consecutive quarters of negative GDP growth, there will be no need to speculate about recession expectations, as it will confirm the recession. This is the first negative factor.
The second negative factor is related to monetary policy. The Federal Reserve will hold an interest rate decision meeting next week. It is almost certain that there will be no interest rate cut, which has no significant impact, as it has long been anticipated. However, how the Federal Reserve communicates its decisions will be important information that influences market expectations. Currently, market expectations for an interest rate cut are slightly decreasing. When the tariff war just began, the market anticipated economic pressure, and the Federal Reserve was expected to cut rates four times, with a 100% probability of a cut in June. After a month, the probability of a June rate cut has continuously decreased, and it may be necessary to wait until July for a rate cut. This has also suppressed the potential rebound of Bitcoin.
It has been a whole month since April 2, and as of now, the U.S. has not signed any trade agreements. If this indecision continues, the market's difficulty in fulfilling expectations will increase, leading to the risk of a pullback. Signing an agreement in one month, two months, or three months has different impacts on the market. Currently, the market's trend is almost fully pricing in "reaching the first trade agreement" and "China and the U.S. starting negotiations," but clearly, no substantial good news has been seen. If subsequent bad news emerges that does not meet market expectations, a market adjustment would be reasonable.
At this stage, it is still advisable to maintain the expectation of medium-term fluctuations in the future. Do not have excessive expectations regarding the timing and extent of market rebounds. Not having expectations makes it less likely to get overly excited, and a little rise in safe-haven assets can trigger FOMO. Not having expectations also means that if good expectations are shattered by reality, one won't be too disappointed, losing the motivation to persist and the hope for the future. A tumultuous period is largely a test of investment mentality; March to September of last year was such, and the beginning of this year remains the same. Only by enduring bad times can one wait for good times.
