In the new round of reciprocal tariff wars, why is the world accelerating its embrace of Crypto Assets?

! Image5 The U.S.-China economic and trade talks in Geneva exceeded expectations on 12 May, with U.S. stocks and cryptocurrencies rising amid favorable policies and market expectations. However, the ruling of the US Court of International Trade at the end of the month weakened the “legitimacy basis” of the tariff war, triggering a policy game, and the restructuring of global trade rules entered the stage of “judicial-administrative wrestling”, and there are still concerns about the long-term impact of tariffs. The decentralized, cross-sovereign and anti-policy intervention attributes of crypto assets are becoming more and more favored by investors. Image

The U.S. government got a taste of the sweetness of economic data in May: the latest non-farm payrolls data for April came in at 177,000, which was better than expected, indicating that the labor market remains solid. The Sino-US Geneva economic and trade talks reached a “tariff pause” agreement, which eased the market’s concerns about the disruption of the global supply chain, and consumers’ inflation expectations for imported goods prices (such as electronic products, daily necessities) fell, driving retail consumption intentions to rebound, so it also brought a brighter confidence index: The Conference Board (The Conference Board) released data on the 27th showed that the U.S. consumer confidence index unexpectedly soared to 98 in May, a sharp rebound from 85.7 in April 12.3 points, the largest monthly increase in four years, showing the positive transmission of tariff easing on the consumer side.

However, “good fortune does not come in doubles”, the bitterness of US debt has already reached our lips. With the curtain raised on “Trump 2.0”, the huge tremors in the US debt market have become commonplace. In late May, the yield on 30-year US Treasury bonds soared above 5.1%, close to the highest level in 20 years. There are a series of factors affecting the trend of US debt, such as Japanese bonds and the progress of trade negotiations, but we all know that the fiscal outlook of the United States is the most critical, and a new variable has emerged: at the end of May, the Trump administration’s “One Big Beautiful Bill Act” (we will continue to analyze this later) passed in the House of Representatives, proposing to raise the US debt ceiling from the current $10 trillion to $40 trillion. Predictions quoted by The New York Times show that this bill will push the ratio of US debt to GDP from the current approximately 98% to 125%. The bill is currently awaiting review in the Senate.

In addition, the Federal Reserve’s interest rate cuts remain unclear. The minutes of the Federal Reserve’s May meeting, released on May 28, 2025, indicate that almost all of the 19 officials participating in the Federal Reserve’s policy meeting believe that “inflation may be more persistent than expected,” therefore the Federal Reserve maintains its position of pausing interest rate cuts.

Overall, the current U.S. economy is in a “stable but risky” phase: short-term growth resilience supports the market and is favourable for the dollar, but a broader fiscal and monetary policy backdrop may suppress its pump potential. Subsequently, how the Senate revises the “Beautiful America Act” (such as the scale of tax cuts and the intensity of spending reductions), as well as other circumstances during the signing process, will impact the structure of the U.S. economy and the global financial market. Whether the contradiction of U.S. policy “stimulating short-term growth while overdrafting long-term credit” can be alleviated remains a suspense.

There is a Wall Street proverb that “sell in May” (Sell in May), but the easing of reciprocal tariffs in early April broke that spell. U.S. stocks and crypto markets quickly cleared the negative pricing of the “reciprocal tariff war” faster and more than expected. The S&P 500 rose about 6.15% for the month, the NASDAQ rose about 9.56%, the Dow Jones rose about 3.94%, and the S&P 500 and Nasdaq recorded their strongest May performance since 1990 and 1997, respectively, directly reflecting the market’s optimistic expectations for supply chain repair and improved corporate earnings:

The phase agreement between China and the United States on 12 May directly boosted market risk appetite. The three major U.S. stock indexes soared across the board on the day, with the Dow soaring 1,160 points (2.81%), the S&P 500 rising 3.26%, and the Nasdaq 4%, the biggest one-day gain since 2024. Tech giants became the biggest beneficiaries, with Amazon (AMZN) and Meta (META) rising more than 7% in a single day, and Nvidia (NVDA) and Apple (AAPL) rising more than 6%. Goldman Sachs and other institutions raised their U.S. stock forecasts after tariffs eased, raising the S&P 500 target for the next 12 months to 6,500, emphasizing the increased likelihood of a “soft landing”. But another school of thought is that rising Treasury yields could squeeze corporate earnings, especially technology companies that rely on a low-interest rate environment. This kind of long-short game leads to the market showing the characteristics of “high volatility and high differentiation”.

More controversial is the “Beautiful Law” promoted by the Trump administration. This bill involves multiple areas such as taxation and immigration, and is set to push the ratio of U.S. debt to GDP from the current approximately 98% to 125%, far exceeding the international warning line (commonly considered a debt risk threshold of 90%), exacerbating market concerns about the credit risk of U.S. Treasury bonds. Moody’s also downgraded the U.S. sovereign credit rating from Aaa to Aa1 this month.

The bill claims to “cover debt increment through tax reform”, which boosts expectations of a “soft landing” for the economy in the short term, but the market generally questions the fiscal sustainability of the United States - the federal fiscal deficit in the United States reached $1.147 trillion in the first five months of fiscal 2025, an increase of 38% year-on-year, tax growth is facing headwinds, and the debt “snowball” effect may be difficult to contain. In an interview with CBS, Musk publicly stated that he was “disappointed that the bill increases the deficit”, while the Democrats accused him of “undermining the efficiency of the government”. In the subsequent Senate deliberations, the uncertainty of possible amendments (such as reducing the size of tax cuts) and the president’s signing will be potential core factors to suppress market risk appetite.

In short, the core issue of the market has shifted from liquidity and interest rate cuts to U.S. Treasury bonds, while the “Trump risk” is always online.

As a barometer of digital assets, Bitcoin broke through 100,000 USD in April and then staged a remarkable comeback in May—soaring from the fluctuation range of 95,000 USD at the beginning of the month to 105,000 USD by the end, with a monthly rise of 12%. During this period, it even reached a peak of 112,000 USD, refreshing the high point since April 2024, significantly reversing the market’s inherent perception of it as a “high volatility risk asset.” In the context of a new phase in the tariff war, this resonance effect with U.S. stocks (the Nasdaq index rose 9.56% during the same period) means that investors are re-anchoring assets amid policy uncertainty.

In such a market atmosphere, Bitcoin’s own fundamentals also迎来关键催化, with the “虹吸效应” on the funding side being particularly significant: According to data compiled by Bloomberg, over $9 billion in funds has flowed into U.S. Bitcoin ETFs over the past five weeks, while gold funds have experienced an outflow of over $2.8 billion. This shows that some investors are abandoning traditional gold and turning to Bitcoin, referred to as “digital gold,” viewing it as a new store of value and hedging tool, indicating a significant shift in investment trends.

BlackRock’s internal portfolio, BlackRock Strategic Income Opportunities Portfolio, continues to overweight its Bitcoin ETF (IBIT). With over $72 billion in assets under management, IBIT is one of the 25 largest Bitcoin ETFs in the world, despite its launch last year. From a broader perspective, IBIT’s rapid growth reflects the accelerated integration of cryptocurrencies into the mainstream financial system. On the 19th, JPMorgan Chase announced that it would begin allowing customers to invest in Bitcoin, although its CEO Jamie Dimon remained skeptical. “We’re going to allow customers to buy Bitcoin,” Dimon said at the bank’s annual Investor Day event on Monday, “and we’re not going to provide escrow services, but we’re going to reflect the transactions in customer statements.” "This decision is a significant move for the largest U.S. bank, and it also marks a further integration of Bitcoin into the mainstream investment space, or a catalyst for institutions such as Goldman Sachs to follow suit.

The current trend of loosening cryptocurrency regulations in the United States has also brought about a positive new climate. On May 12, Paul S. Atkins, the new chairman of the U.S. Securities and Exchange Commission (SEC), delivered a keynote speech at the crypto task force tokenization roundtable, proposing the goal of making the U.S. the ‘global crypto assets capital,’ and announced that the SEC would shift its regulatory approach from ‘enforcement-led’ to ‘rules-based.’ More specifically, the SEC is considering three key reforms—clarifying the identification standards for security tokens, updating custody rules to allow self-custody under certain conditions, and establishing a conditional exemption mechanism for new products, among others. This means providing a clearer legal framework for crypto market participants, reducing uncertainty, and promoting innovation.

In addition to the direct impetus of funding and regulation, policy breakthroughs in the stablecoin space have injected new impetus into Bitcoin’s pricing logic. On May 19, the U.S. Senate voted 66 in favor and 32 against to pass the procedural vote of the National Innovation Act for Guiding and Building U.S. Stablecoins (GENIUS Act), marking the imminent implementation of the first federal regulatory framework for stablecoins in the United States, which will reshape the U.S. crypto asset market and impact the global financial system. Just two days later, on May 21, the Hong Kong Legislative Council passed the Stablecoin Bill, which is expected to take effect within the year, demonstrating a breakthrough in the field of stablecoin regulation in Hong Kong. The two bills form a synergistic effect and jointly promote the standardization of the global stablecoin market, bringing new funding channels to the digital currency market on the one hand, and providing institutional support for the development of the Web3 ecosystem on the other hand. With the dual entry of “traditional financial institutions + regulatory system” and the acceleration of the real-world asset on-chain (RWA) narrative, the market’s consensus on Bitcoin as a “store of value” will be further strengthened, and its unique position in global asset allocation will become more and more prominent.

What is equally worth looking forward to in the future is that the fluctuations in traditional financial markets will not exert a one-way pressure on crypto assets; instead, at certain stages, they will become a driving force for their pump: In the short term, the rise in U.S. Treasury yields has raised market concerns about the U.S. fiscal situation, prompting safe-haven funds to flow into the crypto market; from a long-term perspective, the deterioration of the U.S. fiscal situation may enhance the safe-haven appeal of crypto assets, as this fiscal pressure may undermine confidence in the U.S. dollar and Treasury bonds, prompting investors to turn to decentralized assets like Bitcoin to hedge credit risk.

The cryptocurrency carnival in May signifies that while the traditional financial system is struggling amid tariff frictions, debt crises, and monetary policy dilemmas, Bitcoin is becoming a new choice for capital to hedge against the “uncertainty of the old order.” As regulatory easing transitions from expectation to reality, this reconstruction process may accelerate. Of course, the medium-term suppression of U.S. Treasury yields and the fluctuations in regulatory policies could pose challenges to this rally. Nevertheless, the narrative of Bitcoin as “digital gold” has entered the mainstream discourse.