Tariffs, tariffs and more tariffs.

Trump’s tariffs have certainly rattled the markets. So why is he nuking our bags? So far all his actions have been in line with what he promised to do. So let’s take him at face value - his stated goal with the US economy is to bring manufacturing back onshore and the blunt instrument of choice to achieve this goal is the tariff. 

So while he has delivered the widely expected tariffs, the fear is that this will escalate to reciprocal tariffs from non US nations which escalates into more and more reciprocal tariffs resulting in a trade war where GDP plummets, inflation booms and everyone heads into a recession with no real winners. Trump is known for his aggressive negotiating tactics. The tariff threats could just as easily go the other way and be used as leverage to incentivise deals where the US gets what it wants and we de-escalate, entering into a period of even more free trade. The latter is a win for everyone. The former is a loss for everyone. 

Either way, this is just the beginning. The dust has not settled and it’s doubtful that it will have settled by tomorrow either, however it does set us up for a potential relief rally while the big boys reshuffle their cards before all is said and done.

Sell the rumour, Buy the news?

What moves markets? Only one thing. When there are more willing sellers than there are buyers or vice versa. Once everyone has sold, there are no more sellers left to push the price down. In fact, anyone who was short, will eventually have to cover those shorts which is equivalent to buying and this can be a primary cause for relief rallies. Has that already happened? Maybe, maybe not. Let’s take a look… 

Long term holders have stopped selling and are back buying again while short term holders are nearing their typical bull market thresholds of absolute pain:

Source: Checkonchain.com

Sentiment is one of the best contrarian indicators in crypto and we have really hit some fear recently, right off the back of the ‘Fartcoin era’ of extreme greed. The first bounce rally out of this cycle’s previous extreme greed occurred in the ‘Book of Memes era’ around 126 days later and we are currently sitting at a similar point in time once again:

Bitcoin also loves to bounce off the golden pocket fibonacci retracement level in bull markets and so far so good:

So while prices have cooled from their ATHs there is a decent level of support here.

The Bigger Picture

While things are uncertain for now, this will resolve in time and markets are always forward looking. If you didn’t know anything about the news it would be easy to look at this as just another pull back in a normal bull market in an expanding asset class that TradFi are just warming up to. 

On the institutional front we are seeing more activity. Saylor is back buying big again. Gamestop is coming in too with a 1.5 billion dollar purchase of btc and we have a lot of potential future catalysts that could bring the next wave of money flooding into crypto. The big picture chart for BTC looks fine for now with the invalidation back towards the 70k mark.

The DOGE team has mentioned numerous times that for every dollar of government spending they can cut, they will be looking at returning a portion of that to US citizens. Hello stimmy cheques. This fueled the last cycle’s explosive altcoin rally and with regulation clearing the way forward, we might see this again.

Banks and institutions are being given the green light to play with crypto. The narrative is that stablecoins are being launched and there is a path where more institutions are going to be allowed to interact with DeFi and custody crypto.

Crypto is affected by global liquidity but within the crypto ecosystem itself, stablecoins are at the heart of its liquidity. This chart shows the dynamics between stablecoin supply and crypto - it is a bit difficult to decipher between expansions in stablecoin from fiat inflows which expand stables and then usually flow into crypto (bullish) vs participants exiting crypto into stables (bearish). The markets will tell us the truth soon enough.

This content is for general informational purposes only, is not financial, investment, legal, or tax advice, and should not be relied upon as a substitute for professional guidance. Always do your own research and consult a qualified professional before making financial decisions.