Cryptocurrency Markets Face Intense Scrutiny Amid Powell’s Firm Stance
Cryptocurrency markets are facing intense scrutiny as recent comments from Powell indicate no signs of easing. While Trump strongly calls for interest rate cuts, Powell appears to ignore these demands. New leaks related to Trump signal potential future developments.
Trump Leaks
A White House official shared significant insights with WaPo regarding Trump’s mindset. These revelations are considered crucial, as they contain implicit messages meant for the markets.
“He is now at the peak of not caring. Bad news stories? He couldn’t care less. He will do whatever he promised during the campaign.”
Trump criticized China for its retaliatory measures, suggesting they were misguided. He hinted at possible agreements with Vietnam while also reiterating that he wouldn’t lift tariffs without getting what he wants. The latest leaks warn of a potential global crisis as the U.S. and others stubbornly retaliate.
Third World War
From the first part, it is clear that Trump is resolute. But what about his rivals? China announced a 34% tariff as the S&P 500 faced losses of $3.5 trillion over two days. The stock markets experienced a 5% decline, signaling a bearish trend. Details on the 11 companies affected by China’s tariffs were revealed today, indicating a sharp end to the U.S.’s narrative of affordable technology and innovation.
Oil prices dropped around 6%, signaling a recession. The two-day decline surpassed 15%, marking the largest drop since April 2020 when the pandemic paralyzed the global economy. This downturn reflects concerns over reduced production and potential demand deficiencies amid global recession fears.
The Kobeissi Letter stated:
“In 2024, the U.S. will import $439 billion from China, while China will import $143 billion from the U.S. This results in a total annual U.S.-China trade of $582 billion. Including the recent 34% tariffs imposed by both the U.S. and China, this figure amounts to roughly $198 billion annually. This is a TAX.”
Remarkably, excluding retaliation, the reciprocal tariffs implemented Wednesday represent the largest tax increase in U.S. history. These tariffs account for approximately 1.6% of U.S. GDP, exceeding the previous record set in 1968 by 50 basis points.
“We believe the new tariffs announced by Trump and the impending retaliation will reduce GDP and increase inflation. If these tariffs remain long-term, we anticipate a GDP contraction of between -3% and -4%. With rising prices, CPI inflation is expected to approach 4% in the coming months.” – The Kobeissi Letter
Inflation Concerns and Market Impact
Inflation is evident. The bond markets reflect a 90bp decline over two months as stagnation is priced in. Currently, the 10-year yield is below 3.90% for the first time since September 22, 2024, marking the onset of the Fed’s pivot.
What Comes Next?
The EU is preparing countermeasures. Canada is ready to respond. China has already taken action. For now, we have witnessed a trade war that could escalate into a Third World War. The EU’s readiness to invest heavily in defense after years and Germany’s automotive giants establishing tank factories since the last world war signals impending developments.
This is a vicious cycle. If retaliatory measures are taken, the U.S. will also respond. Both Treasury Secretary Bessent and Commerce Secretary Lutnick conveyed the same message.
Today, the U.S. Credit Risk Index reached its highest level since the regional banking crisis. The S&P 500 has officially wiped out over $7 trillion in market value since February 19.
Bitcoin’s Outlook
BTC should progress towards $200,000 if it remembers its original purpose. However, if it continues to perform like a tech stock, the decline in cryptocurrencies may persist.
Today’s optimistic scenario is as follows:
“The Fed should clearly signal interest rate cuts during its meeting in 33 days, marking the end of QT. Trump’s crypto-friendly policies will have a more noticeable impact on U.S.-based projects. As risk markets hit bottom amid rising fears, liquidity may shift eagerly to capitalize on excessive sell-offs. With recession concerns, the market has formed expectations for at least four rate cuts, and Powell should yield to Trump’s clear demands for rate reductions.”
