Although there have been some external events recently that may be seen by the market as the main reason for the decline, such as Trump proposing a 25% new tariff on the EU and then announcing a pause.
However, these events do not have a long-term impact on cryptocurrency prices, as the crypto market has likely become somewhat numb to Trump's constantly changing trade policies. The decline in risk appetite and the stabilization of dollar confidence are more likely reasons, as evidenced by the drop in U.S. Treasury yields and the stabilization of the dollar index, leading to a drop in Bitcoin prices.
Even if there are positive policies, it cannot be denied that the cryptocurrency market has been somewhat quiet recently. The main reason is that buying activity from investors and businesses has come to a halt. Now, investors are waiting for further clarification on Trump's tariff policy and when the Fed will officially announce rate cuts, which is expected to continue driving growth in the cryptocurrency market. The medium to long-term direction will be towards growth.
Trump stirs trade war sentiments again, but rate cuts may be hopeful?
Trump accused China last Friday of violating trade agreements with the U.S., and the White House immediately stated that negotiations were being hindered. Subsequently, the market further declined in the afternoon due to reports that the U.S. is planning broader sanctions against China. The U.S. Trade Representative pointed out that China's delayed approval of rare earth material exports is one of the reasons Trump accused China of breaching the agreement.
Additionally, Trump announced at a rally in Pennsylvania that starting June 4, tariffs on imported steel and aluminum will be raised from the current 25% to 50%, aimed at protecting the U.S. steel industry. He also attempted to facilitate a merger between Japan's Nippon Steel and U.S. Steel to achieve local production of U.S. steel. However, the market does not support such policies, and the uncertainty of Trump's tariffs may rise even higher. Moreover, whether he is legally allowed to do this is another matter.
The court ruled on Thursday that Trump cannot impose reciprocal tariffs globally based on executive orders, requiring the White House to stop the tariff policy within 10 days. The White House immediately appealed, but it may also take other measures to maintain or restart tariffs, adding greater volatility to the success of U.S. tariff policy. Treasury Secretary Mnuchin stated Thursday night that the legal dispute over tariffs has not affected negotiations with China and mentioned that several very large deals are about to be completed, although negotiations with China have stalled slightly.
After the U.S. passed the tax reduction bill, it must raise additional tariff revenue to support these expenditures. However, this trade uncertainty may once again shake U.S. finances and dollar confidence, helping Bitcoin prices continue to rise. Next, let’s discuss rate cuts. The current inflation indicator preferred by the Fed has slowed to an annual growth rate of 2.1%, below expectations, and core inflation is also slightly below expectations, which helps push for future rate cuts.
Last week, the Fed also released the minutes of the early May meeting, showing that U.S. interest rate policy will remain unchanged. The target range for the federal funds rate remains at 4.2% to 4.5%, with the primary credit rate also maintained at 4.5%. Despite the market and Trump's administration expecting rate cuts, the Fed emphasized that the current policy is cautious and appropriate, and future adjustments will depend on economic conditions and policy tools.
Powell stated that the current policy stance is appropriate and will be adjusted according to FOMC decisions and operational needs. Under stable inflation and unemployment, rate cuts may start as early as September 2025. The current policy of holding steady is a wise move, as the Fed is responding cautiously to global economic uncertainties. This reflects the Fed's strategy of seeking a balance between maintaining financial stability and economic growth.
In the current environment of high uncertainty in trade policy, unstable confidence in the dollar, and the U.S. fiscal crisis combined with the backdrop of rate cuts, Bitcoin would be an excellent medium to long-term investment choice. The recent correction is just a normal emotional adjustment following a price increase. Moving forward, we will continue to observe market developments. If there are no surprises, the market may be reheated next quarter regarding the U.S. fiscal crisis.
Today's panic index is 58, and the market has reached a neutral state.
Bitcoin's lowest point was 103068, and Ethereum's lowest was 2468. Previously, I mentioned the positions for Bitcoin at 105000 and Ethereum at 2500, which provided short-term buying opportunities. Today the market began to rebound. Hold on and observe. Tariffs are just a passing wind and not a long-term factor affecting the market. Trump’s negotiation strategy is one of high pressure - negotiation - relaxation, which only has a slight short-term impact. The long-term mainline remains rate cuts. Currently, the market should not go up directly but will slowly rise with downward spikes. Market leverage is still a bit high and needs to be cleaned up. Players should manage risk well.
