With Bitcoin down and U.S.–China tariffs now at 84%, does this mark the start of another systemic selloff, or will the Fed manage to contain the fallout?
Beijing announces further tariffs against the U.S.
Trade tensions between the U.S. and China have escalated quickly in recent days, leading to visible pressure across global financial markets.
On Apr. 6, China retaliated against the U.S.’s tariff escalation by announcing a 34% counter-tariff on American goods, directly responding to the 34% levy President Trump had introduced just days earlier under his new “Liberation Day” tariff policy.
In turn, Trump said that if China doesn’t withdraw its countermeasure, the U.S. will impose an additional 50% tariff on top of existing levies.
With a 20% base tariff already in place since March, some Chinese imports could face a cumulative tax burden of up to 104%.
Now, tensions have escalated further. On Apr. 9, China unveiled a more aggressive response: a total 84% tariff on U.S. goods, effective Apr. 10. This includes the earlier 34% hike, signaling Beijing’s decision to double down rather than de-escalate.
U.S. stock futures fell sharply on Wednesday as China announced sweeping retaliatory tariffs on American goods. Dow futures sank 790 points, or 2.1%, while S&P 500 futures dropped 1.8%. Nasdaq-100 futures also declined, down 1.5%.
As of Apr. 8, the S&P 500 has dropped below the 5,000 mark for the first time in nearly a year and is now down 18.9% from its February high, close to the technical threshold of a bear market.
According to LSEG, S&P 500 companies have lost $5.8 trillion in market value over the past four days, marking the steepest four-day decline since the index was created. Japan’s Nikkei and other Asian markets have also started showing similar downward trends.
Crypto markets have not been immune. The global crypto market cap has fallen to $2.45 trillion, down from $3.66 trillion in mid-January, just before Trump’s inauguration.
Bitcoin (BTC), which had hit an all-time high of $109,000 in January, is now trading around $76,000, with lows of $74,500 seen in the past 24 hours. Ethereum (ETH) is down over 20% in the past week, currently trading near $1,450.
The Crypto Fear and Greed Index, which tracks market sentiment based on price volatility, trading volume, and social trends, has fallen to 18. This level, categorized as “extreme fear,” hasn’t been seen since June 2022.
Given these conditions, there’s growing speculation about whether the Federal Reserve might consider a rate cut in the near term, and if so, what that could mean for digital assets. Let’s find out.
What the data is actually telling us
Recent movements in the financial markets point to a period of sustained stress rather than a short-term correction. The S&P 500 has now entered its 11th-largest uninterrupted decline since 1940, falling 12.1% over the last four trading sessions.
That puts the current drawdown in the same statistical range as those recorded in March 2020, October 2008, and September 2001, periods that were marked by wider macroeconomic or geopolitical disruption.
The volatility index (VIX) has also remained elevated. For the third consecutive day, the VIX closed above 45 on apR. 8. This pattern has been observed only three times in recent decades — during the bear markets of 2008, 2020, and now 2025.
While not a predictive signal by itself, it reflects a broader repricing of risk across the system, with volatility staying above usual thresholds for an extended period.
Beyond equities, bond markets are seeing ongoing turbulence, partly due to the unwinding of carry trades and lingering concerns over inflation that may prove more durable than previously assumed.
Several analysts have noted that the current volatility is making it harder for investors to assess risk premiums and price in future expectations with confidence.
There’s also growing skepticism around expectations of rapid policy easing by the Federal Reserve. Economist Nouriel Roubini, among others, has pointed out that markets may be too quick to assume that central banks will intervene forcefully.
According to this view, any potential support is likely to be delayed or muted unless political rhetoric, particularly from President Trump on trade matters, is reined in.
Meanwhile, Bank of Japan Governor Kazuo Ueda has indicated that rate hikes will continue if domestic conditions improve as projected.
However, he also noted that global trade tensions remain a key variable, suggesting that monetary policy abroad may remain reactive rather than proactive until the broader picture stabilizes.
Will the Fed cut rates?
As the U.S. economy faces renewed pressure, investors are rethinking how soon the Federal Reserve might be forced to act.
According to the CME FedWatch Tool, the probability of a 25 basis point cut at the Fed’s next meeting on May 6–7 has risen to 54%. Just a week ago, that number stood at 10%.
The sudden change reflects the growing concern that persistent financial stress, driven in part by tariff-related shocks, could impact consumer confidence and business investment more quickly than anticipated.
But the signals from the Fed remain cautious. San Francisco Fed President Mary Daly stated this week that there’s “no rush” to lower rates.
Despite acknowledging some short-term inflation concerns due to tariffs, she noted that economic growth remains strong and policy is currently “in a good place.”
Federal Reserve Governor Adriana Kugler offered a similar perspective. She suggested that the recent inflation uptick may be driven by expectations around the impact of new tariffs, not necessarily a fundamental shift in underlying price trends.
Kugler reiterated the Fed’s commitment to its 2% inflation target, emphasizing that keeping long-term inflation expectations anchored remains a top priority.
Still, not everyone agrees that waiting is the right move. Peter Schiff, a financial commentator and well-known Bitcoin critic, argues that the Treasury market is already signaling deeper instability, with yields on 10- and 30-year bonds reaching 4.5% and 5%, respectively. He warns that without a rapid rate cut and a liquidity injection, the strain could worsen.
Crypto analyst Quinten observed a similar trend, noting that investors aren’t moving into traditional safe havens like government bonds even as stocks decline.
When both equities and bonds fall in tandem, it usually reflects tightening liquidity conditions, conditions that crypto assets tend to respond to quickly.
If the Fed does decide to cut rates, digital assets could benefit from the renewed availability of liquidity. Historically, lower interest rates have pushed more capital into higher-risk, growth-oriented assets, crypto included.
A rate cut could ease the current selling pressure and potentially restore investor appetite, especially for assets like Bitcoin that have previously performed well during expansionary policy periods.
On the other hand, if the Fed holds rates steady and adopts a wait-and-see approach, crypto markets could remain under pressure, particularly if the broader financial environment continues to deteriorate.
Liquidity remains a key input for crypto valuation, and without clear signs of relief, the sector may continue to reflect the strain seen in other asset classes.
