Since President Trump suddenly rekindled trade hostilities, attitude toward crypto and risk in general has entered a tumultuous period. He suggested more than increasing the current 20% tax to a high 50% on items from the European Union. The statement caught markets at high levels as the S&P 500 neared the key 6,000 mark in the midst of decreasing volatility.
According to QCP’s latest report, the timing of Trump’s tariff proposal has drawn attention from market participants who were positioning for continued stability. However, markets managed to stabilize after Trump announced an extension of the tariff implementation deadline to July 9. This provided temporary relief from immediate trade war concerns.
European equities and U.S. futures opened higher following the deadline extension. However, the episode serves as a reminder of how quickly policy risk can change market calm into chaos.
Crypto volatility spreads compress ahead of deadline
The crypto market has shown resilience despite the trade tension volatility. Bitcoin’s July-to-June volatility range, which had crossed more than 2 vols in the previous week, has fallen back below 1. This suggests that the market may be preparing itself for another policy change ahead of the new July deadline.
Bitcoin dropped to $106,000 over the weekend but quickly recovered to $110,000 soon afterward as persistent spot ETF inflows propelled it. BlackRock’s IBIT has seen 30 consecutive days of net inflows.
Everyone in the markets is holding out for Friday’s PCE inflation report, which will provide important feedback for Federal Reserve policy. While oil prices have lost steam in recent cycles, increasing port congestion in Europe is beginning to be felt in Asia and the United States.
This clogging risks raising shipping expenses and causing new indirect inflationary pressures. The combination of tariffs on trade and supply chain disruptions might make it difficult to manage inflation.
There has been a steep divergence of crypto versus tech equity sentiment. Whereas digital assets are holding up, outflows in the TQQQ NASDAQ ETF since early April reflect hedging and rotation of investors’ portfolios despite underlying equity strength. This rotation implies that institutional investors will view cryptocurrencies as possessing different risk-return profiles than traditional technology stocks.
