104% Tariff Threat Sparks US-China Trade War Panic, Can Bitcoin Hold $70,000 Key Level?

The attempt to buy the dip failed as the market did not receive any good news. Early this morning, the White House Press Secretary announced that the additional 104% tariff on China went into effect at noon Eastern Time, leading to another global financial market plunge.

On April 3, when Trump's tariff policy was introduced, U.S. Treasury Secretary Benson advised in a post that all countries should refrain from retaliatory actions and wait to see if there are any negotiations before April 9. There was even a rerun of the "fake news" drama, hoping that Trump might be willing to negotiate on the trade barriers he imposed on multiple countries and specific products, triggering a short-lived "resurrection" in the global capital markets.

Related Reading: "CNBC Guest's Catchphrase Leads to $3 Trillion 'Tariff Fiasco,' Becoming the Most Absurd 10 Minutes in Financial History"

However, after days of bargaining, the market did not receive any good news. From 10% at the beginning of the year to 20% in March, then 34% in early April, and now with an additional 50% "retaliatory escalation," the U.S.-China trade friction has escalated into an "economic nuclear war."

Amid U.S.-China Trade War, Can the Stock Market Hold Up?

Since the Trump administration announced a new round of tariff policies last week, the international capital markets have experienced severe turbulence, with the U.S. stock market taking the brunt of it. By the end of trading on Tuesday, the S&P 500 index fell below 5,000 points for the first time in nearly a year, down 18.9% from its peak on February 19, just a step away from the 20% decline threshold of a "technical bear market." It is estimated that the market capitalization of S&P 500 index constituents evaporated by $5.8 trillion in four trading days, marking the most severe four-day consecutive decline since the index was established in the 1950s.

Simultaneously, the U.S. tariff policy has triggered a chain reaction in the global capital markets. According to Bloomberg, since April 3 when Trump proposed the so-called "reciprocal tariffs," the total market value of global stocks has shrunk by $10 trillion, slightly higher than half of the EU's GDP. U.S. tech giants have been hit hard, with Apple, Microsoft, and seven other major tech companies collectively losing $1.65 trillion in market value. Apple, due to its heavy reliance on overseas supply chains, saw its stock price plummet by nearly 23% in four days, marking the largest weekly drop since the outbreak of the 2020 pandemic.

Previously, many thought leaders in the crypto community believed that crypto assets would not be affected by traditional tariffs as their transactions do not need to pass through borders and customs. They argued that in the face of a new era of global trade protectionism and barriers, the value proposition of cryptocurrencies would be even more pronounced. Michael Saylor, the founder of MicroStrategy, stated on April 3, "Bitcoin has no tariffs."

However, the total cryptocurrency market capitalization has dropped by 35% from its peak in December 2024, falling from $3.9 trillion to $2.5 trillion. The "Cryptocurrency Fear and Greed Index" is currently at 17, indicating extreme fear and signaling a bearish market sentiment.

Last night, Bitcoin once again fell below $75,000. Meanwhile, BTC dominance continues to rise, the altcoin market is in a dire state, and Ethereum has once again dropped below $1,400.

Over the past 12 hours, the crypto market has seen a total of $243 million in liquidations, with $192 million from long liquidations and $51.03 million from short liquidations.

The ongoing decline in Bitcoin's price may even force the "HODL" strategy holders to sell their Bitcoin holdings. According to a Form 8-K filed with the SEC on April 7th, if the Bitcoin price continues to fall, the holders may be forced to sell their Bitcoin holdings to meet their obligations, breaking Michael Saylor's "never selling Bitcoin" pledge.

Since Trump's victory in the November 2024 election, the holders have acquired 275,965 BTC at an average price of $93,228 per BTC ($25.73 billion), with this portion currently holding an unrealized loss of $4.6 billion.

Growing Pessimism: Analysts' Views on the Current Market

Over the past week, several Wall Street banks, including Goldman Sachs and JPMorgan, have warned that if the trade war continues to escalate, the U.S. and global economy could enter a recession this year, further weakening the attractiveness of the financial markets.

Despite this, the White House team is celebrating victory. "We are bottoming now, really bottoming," said Peter Navarro, Trump's chief trade advisor, on Fox News on Monday night. "The rebound is coming. The companies in the S&P 500 that have brought production back to the U.S. will drive the recovery, and it will happen quickly. The Dow at 50,000, I bet my bottom dollar, and there will be no recession."

However, Navarro's optimistic comments did not receive Jamie Dimon's, CEO of JPMorgan, endorsement. In his annual shareholder letter on Monday, Dimon warned that Trump's tariffs would raise prices, drag down the global economy, and weaken the U.S.'s global position by disrupting its ally system. Even some of Trump's allies, including Elon Musk and Bill Ackman, have recently warned that this tariff policy is seriously flawed and is the wrong approach.

Related Reading:《How Do Wall Street Big Shots View Trump's Tariff Policy After the Financial Market Bloodbath?》

Crypto analyst Phyrex believes that from the Fed's behavior logic, even a "defensive rate cut" is unlikely to be implemented quickly unless inflation significantly falls. The real watershed may be when the US GDP data is released at the end of April.

Looking at the crypto market, BTC's turnover rate has dropped today. URPD data shows that even though the price has dropped below $77,000, investors in the $93,000 to $98,000 range have hardly reduced their positions. This indicates that the current selling pressure is not coming from high-level holders, panic selling at the top has not occurred, the on-chain structure is relatively healthy, and as long as there is no more frequent policy reversal in the future, BTC and the risk market may still have room for a phase-wise recovery.

As US treasuries no longer act as a safe haven, the 10-year treasury yield has risen to around 4.3%, higher than the level at the end of March, pushing up the cost of mortgages and other types of loans. The 30-year US bond yield closed at 4.76%, rising by nearly half a percentage point from Monday's low. The US two-year to ten-year treasury yield spread widened to 48 basis points, the steepest level since May 2022.

BitMEX co-founder Arthur Hayes posted, "The Fed doesn't have much time left, the situation is out of control. Previously, a stock market decline would lead to a drop in the US 10-year bond yield, benefiting risky assets. But now, a stock market decline accompanied by an increase in the US 10-year bond yield is a bad thing. The market has finally realized that if US dollar export revenues decrease, there will no longer be buying pressure for bonds or stocks, and the game is over."

Pessimistic expectations are still strengthening. Trader Eugene wrote, "The introduction of global trade tariffs marks a change in the world order unseen in over 50 years. Free trade has been a key factor driving productivity and economic growth, leading to the longest bull market in history. A shift from openness to protectionism will have far-reaching consequences, which will take years to gradually emerge unless Trump completely abandons his tariff plan. I believe this possibility is very low. This will pose a significant long-term resistance to global risky assets."

Regarding cryptocurrency, the recent structural decline in active developers may be the most worrying thing. In the previous cycle, we could observe developer activity and feel reassured because we knew our industry was still benefiting from long-term tailwinds. Fast forward 2-3 years, and we have not produced anything particularly interesting or important, and the future outlook is even worse than it was back then.

In the previous cycle, we were looking forward to the launch of an ETF and a better regulatory environment under government support for cryptocurrency, as the light at the end of the tunnel. Now that all of these have materialized, but once again failed to meet expectations, I don't see anything in the future that could free cryptocurrency from its inherent "Ouroboros" (a self-repeating, self-devouring conundrum).

Looking at a more macro level, the world is currently experiencing a once-in-a-century upheaval. Billionaire hedge fund manager and Bridgewater Associates founder Ray Dalio wrote that while the market and the economy are currently focused on tariffs, deeper global issues should not be overlooked. He pointed out that we are in a "classic collapse" phase of monetary, political, and geopolitical orders, a situation that may only occur once in a lifetime but has occurred multiple times in history.

Dalio suggested not to be distracted by short-term events like tariffs and instead focus on the interaction of five key forces (economic, political, geopolitical, natural, technological). Studying similar cycles in history (such as currency crises) can help predict the future.

"The current changes are part of a historically significant cycle, where tariffs are just a manifestation, and the real driving force is the structural collapse of the monetary, political, and geopolitical order. Understanding the interaction of these forces and learning from historical experiences is essential to better prepare for the future."