Escalation in the US-China trade war may push back the peak of the crypto bull run.
In the ever-evolving landscape of global economics, the ongoing trade standoff between the United States and China is casting a long shadow over various markets, including cryptocurrencies.
Central banks are finding themselves in a bind due to rising inflation, which could have far-reaching consequences for the crypto markets. The Federal Reserve, for instance, is under pressure but is unlikely to slash interest rates imminently, a move that could fuel crypto rallies. This cautious approach stems from inflationary concerns and geopolitical factors, such as the US-China tensions, that limit the Fed's ability to ease monetary policy.
Meanwhile, China is bracing for a prolonged standoff by diversifying its trade partners and doubling down on homegrown technology. State media in the country is encouraging the replacement of American technology with domestic alternatives, a move that could further impact markets.
Game theory suggests that both economic giants are digging in for a tough standoff, leading to serious market swings. Min Xue, an investment partner at Foresight Ventures, believes this trade conflict is a long-term issue. Xue predicts high volatility for both U.S. equities and crypto over the next six months, and the bull market peak for crypto is likely to occur later than Q3.
The intensifying US-China conflict creates a challenging macroeconomic backdrop for cryptocurrencies. Investors may need to adjust their timelines and brace for continued volatility as this geopolitical drama unfolds. The Shib Daily, the official media and publication of the Shiba Inu cryptocurrency project, reports that the crypto bull run is facing fresh headwinds from this escalating trade standoff.
The trade conflict has also led to specific actions that impact American businesses. For example, Beijing has ordered Chinese airlines to halt deliveries of Boeing jets, affecting America's largest exporter. Additionally, U.S. firms like PVH (parent of Tommy Hilfiger) and gene-sequencing company Illumina have been added to an "unreliable entity" list, restricting their business in China.
China is also tightening export controls on rare-earth minerals essential for semiconductors, defense systems, and green technology. This move could have significant ripple effects across various industries, including the crypto sector.
Moreover, China has been accused of cyberattacks on behalf of the NSA, with authorities issuing notices to individuals allegedly involved. This development adds another layer of complexity to the already tense relationship between the two nations.
In response, China is ready to retaliate and potentially escalate beyond previous measures in the trade conflict. The path forward for the global economy and crypto markets looks choppy, with prolonged geopolitical tension and resulting market volatility likely in the coming months.
The Trump administration, on the other hand, overestimates what tariffs can achieve in terms of bringing manufacturing back, Xue states. This perspective underscores the complexity of the situation and the need for a nuanced understanding of the interplay between geopolitics, economics, and markets.
In this dynamic environment, investors would do well to stay informed and adaptable, ready to navigate the turbulent waters of the global economy.
