This week, the crypto market took a significant hit due to turmoil driven by tariffs, with analysts suggesting that heightened tensions between the United States and China could lead to a dire outcome.
Amid widespread panic among investors, analysts have observed that Bitcoin (BTC) and the broader crypto market are facing renewed challenges amid a substantial sell-off. In the event of global economic shocks stemming from the escalating tariff conflict between the U.S. and China, further declines are likely.
Following the recent “post-Rose Garden announcement,” there was a significant drop in global equities, with BTC losing its recent gains and falling below $75,000 during ‘Black Monday.’
However, analysts also contemplate alternative scenarios, indicating that the most prudent approach for investors is to exercise patience.
A worst-case outlook?
An analyst noted in a recent market update that the reaction to the tariffs indicates a growing anxiety around a potential slowdown in U.S. economic growth. Fear escalated after the U.S. President announced additional tariffs on Chinese imports.
In retaliation, China announced its own tariffs and imposed restrictions on rare earth exports. The U.S. President then hinted at a further 50% tariff increase on goods from China.
This chain of events, analysts assert, could signify the onset of a worst-case scenario for risky assets and cryptocurrencies.
“This marks the beginning of a concerning scenario. It would negatively impact growth for all nations and signal a global economic shock. We would avoid crypto until we reach deep bear market levels if this scenario materializes,” the analyst remarked.
While this negative outcome is certainly possible, analysts also propose a best-case scenario as a potential offsetting force. If tensions ease before April 9, 2025—when reciprocal tariffs are slated to take effect—it could be the turning point for Bitcoin.
Although only a 15% probability is attributed to this optimistic outcome, it could potentially result in stabilization across risk asset markets and a robust rebound for digital currencies.
In contrast, the worst-case scenario has been assigned a 30% probability.
However, the base case projected by analysts carries a 55% likelihood. In this outcome, some form of negotiations could lead to a resolution that encourages crypto recovery. June is highlighted as a critical month, as initially noted by Treasury Secretary Scott Bessent.
If this scenario unfolds, markets are likely to experience continued volatility amidst uncertainty. Bitcoin and equities may fluctuate as economic earnings and tariff repercussions shape market sentiment.
Regarding potential market support, analysts indicate that intervention from the Federal Reserve could be beneficial.
However, a weaker labor market and “some visible economic deterioration” might be necessary to prompt action from the Fed. In this context, analysts advocate for a patient approach as investors weigh the possibilities of escalation versus negotiation.