New Trends in Tariff Policy, Increasing Appeal of Crypto Assets

In mid-May, the China-U.S. economic and trade talks made progress, alleviating market concerns about disruptions in the global supply chain. This positive signal propelled significant increases in the U.S. stock market and the crypto assets market. However, at the end of the month, the ruling by the U.S. International Trade Court raised questions about the legitimacy of the tariff war, triggering a new round of policy negotiations. The reconstruction of global trade rules has entered a new phase of judicial and executive power struggles, and the long-term impacts of tariffs remain uncertain. Against this backdrop, the decentralized and cross-sovereign characteristics of crypto assets increasingly highlight their advantages against policy interventions, attracting more investor attention.

The economic data from the United States in April showed strong performance, with non-farm employment growth exceeding expectations, indicating that the labor market remains robust. The "tariff suspension period" agreement reached between China and the U.S. has also alleviated consumer concerns over rising prices of imported goods, boosting retail consumption willingness. The consumer confidence index recorded its largest monthly increase in four years in May, reflecting the positive impact of tariff easing on the consumption side.

However, the U.S. debt issue is becoming increasingly severe. In late May, the yield on 30-year U.S. Treasuries surged to its highest level in nearly 20 years. The new bill passed by the House of Representatives could significantly raise the U.S. debt-to-GDP ratio from the current approximately 98% to 125%, raising market concerns about the U.S. fiscal outlook. Additionally, the Federal Reserve maintains its pause on interest rate cuts, believing that inflation may be more persistent than expected.

Despite facing these challenges, the U.S. stock market performed strongly in May. The S&P 500 Index and the Nasdaq recorded their strongest May performances since 1990 and 1997, respectively, reflecting the market's optimistic expectations for supply chain recovery and improvements in corporate earnings. However, rising U.S. Treasury yields may squeeze corporate profit margins, particularly impacting tech companies that rely on a low-interest environment, leading to a market characterized by high volatility and differentiation.

Bitcoin, as a barometer of digital assets, performed impressively in May. It rose from a fluctuation range of $95,000 at the beginning of the month to $105,000 at the end of the month, with a monthly increase of 12%. This resonance effect with U.S. stocks indicates that investors are reassessing asset allocation amid policy uncertainty.

The flow of funds shows that investors are gradually shifting from traditional gold to Bitcoin, known as "digital gold." In the past five weeks, U.S. Bitcoin ETFs have attracted over $9 billion in inflows, while gold funds have faced outflows of over $2.8 billion during the same period. This trend reflects that Bitcoin is being viewed as a new store of value and hedging tool.

The improvement of the regulatory environment has also brought good news to the Bitcoin market. The new chairman of the U.S. Securities and Exchange Commission has proposed the goal of building a "global Crypto Assets capital" and announced a shift in the regulatory model. The U.S. Senate and the Hong Kong Legislative Council have successively advanced the regulatory framework for stablecoins, bringing new development opportunities to the digital currency market.

With the dual entry of traditional financial institutions and regulatory systems, the concept of real-world assets on the blockchain (RWA) is gaining increasing attention. The market's consensus on Bitcoin as a "value storage base" is further strengthened, highlighting its unique position in global asset allocation.

In the future, the fluctuations of traditional financial markets may become a catalyst for the rise of crypto assets at certain stages. In the short term, concerns in the market triggered by rising U.S. Treasury yields may prompt safe-haven funds to flow into the crypto market. In the long term, the deterioration of the U.S. financial situation may enhance the safe-haven appeal of crypto assets, encouraging investors to turn to decentralized assets like Bitcoin to hedge against credit risk.

The strong performance of the crypto assets market in May reflects that Bitcoin is becoming a new choice for capital to hedge against the uncertainties of the traditional financial system amid challenges such as tariff frictions, debt crises, and monetary policy dilemmas in the global economy. With the improvement of the regulatory environment, this trend may further accelerate. Although rising U.S. Treasury yields and the fluctuations in regulatory policies may still pose challenges, Bitcoin's positioning as "digital gold" has gradually gained mainstream recognition.