A new round of tariff wars: Why is the world accelerating its embrace of cryptocurrency?

On May 12, the China-U.S. Geneva economic and trade talks exceeded expectations, leading to a rise in U.S. stocks and cryptocurrencies under favorable policy conditions and market expectations. However, the ruling by the U.S. International Trade Court at the end of the month weakened the "legitimacy basis" of the tariff war, triggering a policy game and entering a "judicial-administrative struggle" phase in the reconstruction of global trade rules, raising concerns about the long-term impact of tariffs. The decentralized and cross-sovereign nature of crypto assets, which resist policy intervention, is increasingly favored by investors.

In May, the U.S. government tasted the sweetness of economic data: The latest non-farm payroll data for April showed an increase of 177,000 jobs, better than expected, indicating that the labor market remains robust. The China-U.S. Geneva economic and trade talks reached an agreement on a "tariff suspension period," alleviating market concerns about global supply chain disruptions, leading to a decrease in consumer inflation expectations for imported goods (such as electronics and daily necessities), and boosting retail consumption willingness. This also resulted in a brighter confidence index: data released by The Conference Board on the 27th showed that the U.S. consumer confidence index unexpectedly soared to 98 in May, a significant rebound of 12.3 points from April's 85.7, marking the largest single-month increase in four years, reflecting the positive transmission of tariff easing to the consumption side.

However, "good fortune does not come in pairs," the bitterness of U.S. bonds has also arrived. With the curtain rising on "Trump 2.0," the huge tremors in the U.S. bond market have become commonplace. In late May, the yield on 30-year U.S. bonds soared to over 5.1%, nearing a 20-year high. Factors such as Japanese bonds and trade negotiation progress influence U.S. bond trends, but we all know that the U.S. fiscal outlook is the most critical, and new variables have emerged: at the end of May, the Trump administration's "One Big Beautiful Bill Act" (which we will analyze further below) passed the House of Representatives, proposing to raise the U.S. debt ceiling from the current $10 trillion to $40 trillion. Predictions cited by The New York Times indicate that this bill will push the U.S. debt-to-GDP ratio from the current approximately 98% to 125%, and the bill is currently awaiting Senate review.

In addition, the Fed's interest rate cuts remain unclear. The minutes from the Fed's May meeting, released on May 28, show that nearly all of the 19 officials participating in the Fed policy meeting believe that "inflation may be more persistent than expected," thus the Fed maintains a pause on interest rate cuts.

Overall, the current U.S. economy is in a "steady yet risky" phase: short-term growth resilience supports the market and is favorable for the dollar, but a broader fiscal and monetary policy backdrop may suppress its upward space. Subsequently, how the Senate revises the "One Big Beautiful Bill" (such as the scale of tax cuts and the intensity of spending reductions), as well as other conditions during the signing process, will impact the U.S. economic structure and global financial markets. Whether the contradiction of U.S. policy "stimulating short-term growth while over-drawing long-term credit" can be alleviated remains a suspense.

There is a Wall Street adage that says "Sell in May," but the easing of reciprocal tariffs in early April broke this curse. U.S. stocks and the crypto market quickly eliminated the negative pricing of the "reciprocal tariff war," with the speed and extent exceeding expectations. The S&P 500 index rose approximately 6.15% for the month, the Nasdaq rose approximately 9.56%, and the Dow Jones rose approximately 3.94%. The S&P 500 and Nasdaq recorded their strongest May performances since 1990 and 1997, respectively, directly reflecting the market's optimistic expectations for supply chain recovery and corporate profit improvement:

The phased agreement between China and the U.S. on May 12 directly boosted market risk appetite. On that day, all three major U.S. stock indices surged, with the Dow soaring 1,160 points (2.81%), the S&P 500 rising 3.26%, and the Nasdaq up 4%, marking the largest single-day increase since 2024. Tech giants became the biggest beneficiaries, with Amazon (AMZN) and Meta (META) both rising over 7% in a single day, while Nvidia (NVDA) and Apple (AAPL) rose over 6%. Institutions like Goldman Sachs raised their U.S. stock expectations after the tariff easing, increasing the S&P 500's target level for the next 12 months to 6,500 points, emphasizing the increased possibility of a "soft landing." However, another viewpoint suggests that rising U.S. bond yields may squeeze corporate profit margins, especially for tech companies reliant on a low-interest environment. This tug-of-war has led the market to exhibit characteristics of "high volatility and high differentiation."

More controversially, the "One Big Beautiful Bill" strongly pushed by the Trump administration involves multiple areas such as taxation and immigration, proposing to push the U.S. debt-to-GDP ratio from the current approximately 98% to 125%, far exceeding the international warning line (commonly considered that 90% is the critical point for debt risk), exacerbating market concerns about U.S. bond credit risk. Moody's also downgraded the U.S. sovereign credit rating from Aaa to Aa1 this month.

The bill claims to "cover the debt increment through tax reform," temporarily boosting expectations for a "soft landing" in the economy, but the market generally questions the sustainability of U.S. fiscal policy— in the first five months of fiscal year 2025, the U.S. federal budget deficit reached $1.147 trillion, expanding by 38% year-on-year, with tax revenue growth facing resistance, and the "snowball" effect of debt is likely difficult to curb. Musk publicly expressed his "disappointment with the bill's increase in the deficit" during an interview with CBS, while Democrats accused it of "undermining government efficiency." In the subsequent Senate review process, potential revisions (such as scaling back tax cuts) and uncertainties regarding presidential signing will become potential core factors suppressing market risk appetite.

In short, the current core issue in the market has shifted from liquidity and interest rate cuts to U.S. bonds, while the "Trump risk" is always online.

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

In this market atmosphere, Bitcoin's fundamentals also welcomed key catalysts, with the "siphoning effect" of funds being particularly significant: According to data compiled by Bloomberg, over $9 billion flowed into U.S. Bitcoin ETFs in the past five weeks, while gold funds faced an outflow of over $2.8 billion, indicating that some investors are abandoning traditional gold in favor of Bitcoin, dubbed "digital gold," viewing it as a new store of value and hedging tool, with a significant shift in investment trends.

Among them, BlackRock's internal investment portfolio, the BlackRock Strategic Income Opportunities Portfolio, has continuously increased its holdings in Bitcoin ETF (IBIT). Currently, IBIT has assets under management exceeding $72 billion, and despite being launched only last year, it has already ranked among the top 25 Bitcoin ETFs globally. From a more macro perspective, the rapid development of IBIT reflects that cryptocurrencies are accelerating their integration into the mainstream financial system. On the 19th, JPMorgan announced that it would begin allowing clients to invest in Bitcoin, although its CEO Jamie Dimon remains skeptical. "We will allow clients to purchase Bitcoin," Dimon stated during the bank's annual investor day event on Monday, "we will not provide custody services, but will reflect related transactions on clients' statements." This decision is a significant move for the largest bank in the U.S. and also marks Bitcoin's further integration into mainstream investment, potentially prompting institutions like Goldman Sachs to follow suit.

The current trend of loosening cryptocurrency regulation in the U.S. has also brought about a positive new climate. On May 12, the new chairman of the U.S. Securities and Exchange Commission (SEC), Paul S. Atkins, delivered a keynote speech at the tokenization roundtable of the crypto task force, proposing the goal of making the U.S. a "global cryptocurrency 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 specific conditions, and establishing conditional exemption mechanisms for new products, which means providing a clearer legal framework for crypto market participants, reducing uncertainty, and promoting innovation.

In addition to the direct impetus from funds and regulation, breakthroughs in the stablecoin sector's policies have injected new momentum into Bitcoin's pricing logic. On May 19, the U.S. Senate passed the "Guidance and Establishment of a National Stablecoin Innovation Act" (referred to as the GENIUS Act) with a procedural vote of 66 in favor and 32 against, marking the imminent establishment of the first federal regulatory framework for stablecoins in the U.S., which will reshape the U.S. cryptocurrency market and impact the global financial system. Just two days later, on May 21, the Hong Kong Legislative Council passed the "Stablecoin Regulation Bill," expected to take effect within the year, showcasing Hong Kong's breakthrough progress in stablecoin regulation. The two bills create a synergistic effect, jointly promoting the standardization of the global stablecoin market, bringing new funding channels to the digital currency market, and providing institutional support for the development of the Web3 ecosystem. With the dual entry of "traditional financial institutions + regulatory systems," the narrative of real assets on-chain (RWA) is accelerating, and the market's consensus on Bitcoin as a "value storage base" will further strengthen, highlighting its unique position in global asset allocation.

What is equally worth looking forward to is that fluctuations in traditional financial markets will not exert a one-way suppression on cryptocurrencies; rather, at certain stages, they may become a driving force for their rise: in the short term, the rise in U.S. bond yields has triggered 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 dollar and Treasury bonds, prompting investors to turn to decentralized assets like Bitcoin to hedge against credit risk.

The cryptocurrency frenzy in May signifies that while the traditional financial system is caught in tariff friction, debt crises, and monetary policy dilemmas, Bitcoin is becoming a new choice for capital to hedge against "uncertainty of the old order." As regulatory loosening transitions from expectation to reality, this reconstruction process may accelerate. Of course, the mid-term suppression of U.S. bond yields, repeated regulatory policies, etc., may test this round of upward momentum. But regardless, Bitcoin's "digital gold" narrative has entered the mainstream topic framework.