U.S.-China Trade Tensions Intensify Pressure on Digital Asset Market

The digital asset market is grappling with renewed bearish sentiment as escalating U.S.-China trade tensions weigh heavily on investor confidence. After a steep drop over the weekend, key cryptocurrencies like Bitcoin (BTC) briefly showed signs of recovery before retreating again. While Federal Reserve Chair Jerome Powell’s dovish remarks on potential interest rate cuts have somewhat mitigated the losses, the market remains under pressure. Analysts predict that the recent liquidation events could attract low-price buying interest, potentially stabilizing the downturn.

As of 8:40 a.m. on the 15th, Bitcoin (BTC) traded down 0.61% from the previous day at KRW 170.62 million on South Korean exchange Upbit. On global exchange Binance, Bitcoin recorded a 1.65% drop, settling at $11,342.5. Altcoins also faced significant losses; the CoinDesk 20 Index fell by 3.42%, Ethereum (ETH) declined 2.48% to $4,140, and XRP (XRP) dropped 3.91% to $2.51.

Heavy Liquidations Reflect Market Stress

Data from Coinglass revealed substantial liquidation activity within the last 24 hours, totaling approximately $173.94 million in Bitcoin positions, with 74.14% of these being long positions. Across the broader cryptocurrency market, liquidations amounted to nearly $700 million (roughly KRW 1 trillion).

The wave of liquidations follows heightened concerns over U.S.-China trade disputes. U.S. President Donald Trump criticized China’s move to halt imports of U.S. soybeans, describing it as "unfair" and hinting at potential retaliatory measures, including restricting trade in commodities like edible oils. This geopolitical conflict has unsettled markets and pressured digital asset valuations.

Geopolitical Uncertainty Weighs on Market Sentiment

Tensions between the two largest global economies are amplifying anxiety in the digital asset market. According to Rob Haworth, strategist at U.S. Bank Asset Management, “As we approach the end of this month, the exit strategy from the trade conflict remains unclear.” He emphasized that the uncertainty stemming from these disputes is a significant driver of weakened investor sentiment.

Powell’s comments on monetary policy have provided a partial cushion for risk assets, including cryptocurrencies. He stated, “The Federal Reserve is in the final stages of completing its quantitative tightening (QT) policy as the labor market cools and employment conditions weaken.” Powell highlighted tightening financial conditions as another risk variable, signaling that rate cuts could be imminent should the economic climate demand them.

Analysts Anticipate Rate Cuts and Looser Monetary Policy

Michael Feroli, chief economist at JPMorgan Chase, viewed Powell’s remarks as a likely precursor to rate reductions at the next Federal Open Market Committee (FOMC) meeting. Krishna Guha, vice chair of Evercore, echoed this outlook, suggesting that Powell’s emphasis on price stability and employment signals ongoing dovish policy.

According to a report by TD Securities, the Federal Reserve may formally announce the conclusion of its QT policy during the upcoming FOMC meeting. Analysts anticipate two rate cuts in October and December, with an additional three expected in 2024. By the end of next year, benchmark interest rates could drop by 1.25 percentage points from the current range of 4% to 4.25%.

Potential Buying Opportunities Amid Declines

While the market grapples with short-term price depreciation, some analysts see the current dip as an advantageous entry point. Vetle Lunde, head of research at K33 Research, noted that market stabilization following liquidation events could signal a potential bottom. “Historically, similar liquidation phases have often marked turning points, making this an ideal time to gradually accumulate Bitcoin,” he suggested.

Lunde pointed to several favorable conditions for long-term accumulation, including expectations of monetary easing, increasing institutional interest, and the likelihood of regulatory approvals for Bitcoin ETFs. These factors could offer traders and investors a strategic opportunity amid market turbulence.

Fear & Greed Index Highlights Pervasive Market Caution

Investor sentiment remains subdued, as evidenced by Alternative’s Fear & Greed Index holding steady at 38 ("Fear") during the latest reading. The index, ranging from 0 to 100, gauges market sentiment, with lower scores indicating selling pressure and higher scores reflecting buying interest.

As geopolitical risks and monetary policy developments unfold, traders are focused on whether current market conditions may provide a foundation for long-term gains. Persistent fear in the market serves as a reminder of the challenges faced, but also underscores potential opportunities for savvy investors willing to navigate the volatility.