Bitcoin at A Crossroads: Topping Out or Gearing Up for Another Breakout?

Cryptocurrency

Summary:

Following Moody's downgrade of the U.S. credit outlook, the House passed Trump's ambitious tax cut proposal—a combination that has heightened concerns over America's fiscal health and debt sustainability. U.S. Treasuries saw a broad selloff, with rising long-end yields pushing term premiums significantly higher. At the same time, the dollar, U.S. equities, and risk assets worldwide came under pressure.

Yet just as risk-off sentiment gripped global markets, Bitcoin—often seen as a high-volatility, high-risk asset—broke to fresh highs and has since hovered near record levels. This decoupling from traditional risk assets has sparked a growing debate: what's driving Bitcoin's divergence, and is there still room to rally after crossing the $110,000 threshold?

Double Exposure or Risk Hedge? Bitcoin's Role Is Evolving

Bitcoin's classification as either a speculative risk asset or an alternative to traditional financial instruments has long been contested. During risk-on phases marked by ample liquidity, Bitcoin has often tracked high-beta assets like tech stocks or the Nasdaq, amplifying bullish moves.

But recent data tells a different story. Over the past month, Bitcoin's intraday correlation with Nasdaq, growth ETFs, and the dollar has been remarkably low. It has also shown limited sensitivity to gold and 10-year Treasury yields. These shifts suggest Bitcoin may be increasingly viewed as a hedge—or even a non-correlated asset class—rather than just a speculative trade.

This evolution isn't entirely surprising given the shifting macro backdrop. With the 90-day tariff pause underway and the U.S. debt ceiling crisis intensifying, policymakers are left with few options—either adopt a tougher stance on tariffs or turn to monetary expansion. Either path may stoke inflation expectations and accelerate de-dollarization, reinforcing Bitcoin's appeal as a scarce, inflation-resistant asset.

With a fixed supply cap of 21 million coins and the advantage of 24/7 global liquidity, Bitcoin offers an alternative tool for portfolio diversification—especially as speculative positioning in gold nears saturation.

Institutional Flows and Trump's Support Fuel the Rally

Alongside the evolving narrative around Bitcoin's role, institutional buying has emerged as a key engine of this bull run.

On-chain data and fund flows confirm this trend. For example, between May 19 and May 25, Strategy Corp. bought 4,020 BTC at market price, investing over $427 million—underscoring strong conviction in current price levels.

More significantly, spot Bitcoin ETFs have seen robust and persistent inflows. With their regulatory clarity and ease of access, these instruments have attracted capital from pensions, sovereign wealth funds, and traditional asset managers. From April 1 to May 27, net inflows into spot Bitcoin ETFs—including those managed by BlackRock, Fidelity, and Grayscale—surged to $33.4 billion, reflecting growing institutional acceptance of digital assets.

These flows have enhanced market liquidity and stability, anchoring Bitcoin's price even during periods of heightened volatility. Institutional demand is increasingly acting as a “floor” during dips—helping reinforce Bitcoin's range-bound resilience.

Adding to the bullish narrative is Donald Trump's implicit endorsement of crypto. DJT is reportedly seeking to raise up to $3 billion for digital asset investments and plans to launch a crypto-focused financial services platform, potentially in partnership with Crypto.com. These developments have injected fresh optimism into the market.

Trump's stance could also shift regulatory expectations, potentially drawing younger and Republican-leaning voters toward crypto while improving Bitcoin's positioning within the U.S. financial system.

Topping Out or Just the Beginning? What Comes Next for Bitcoin

With Bitcoin consolidating after its record-breaking run, the market is asking a pivotal question: is $110,000 a near-term top, or just a stepping stone?

In my view, both the technical structure and macro backdrop point to further upside in the short term.

Technically, Bitcoin has maintained a bullish rhythm since early April: rapid rallies followed by healthy consolidation. This pattern suggests that traders are not panicking at elevated levels, but rather waiting for the next catalyst. Even if short-term pullbacks occur, dip buying near key support zones may build higher price floors.

Macro-wise, the bull case remains compelling. Institutional flows into ETFs show no signs of slowing, and the broader macro narrative—growing deficits and declining trust in fiat systems—continues to chip away at traditional safe-haven appeal. Today's Bitcoin buyers are not merely seeking short-term hedges; they are expressing structural skepticism toward the fiat-based system itself.

Of course, risks remain. A U.S. recession could trigger a flight to traditional safe havens like gold, the yen, or the Swiss franc—potentially sparking a sharp correction in Bitcoin. However, recent U.S. “hard data” has not yet signaled a definitive slowdown. If inflation or jobs data worsens, that could change the trajectory.

In the near term, one key catalyst to watch is the upcoming “Bitcoin 2025” event in Las Vegas. If DJT reveals more concrete plans around fundraising, platform development, or crypto-focused services, it could unlock fresh inflows and reshape market expectations around crypto policy—setting the stage for another leg up in Bitcoin's rally.

Source: Pepperstone

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Economic

China–U.S. Trade War

High-Level EU-China Dialogue Intensifies Amid Rising U.S. Tariff Tensions

As the trade confrontation with Washington deepens, senior European Union and Chinese officials are moving swiftly to forge a coordinated response. According to EU spokespersons and Chinese media, a third high-level meeting between EU Trade Commissioner Maros Sefcovic and China’s Commerce Minister Wang Wentao is scheduled for early June during the WTO Ministerial Conference in Paris. This marks the third direct engagement between the two within a quarter, signaling a strategic urgency from both capitals.

While precise timing remains undisclosed by the EU and China’s Ministry of Commerce has yet to confirm, the geopolitical context of this upcoming dialogue is clear: both economic giants are under mounting pressure from renewed U.S. protectionist policy, particularly following President Donald Trump’s aggressive tariff posture toward EU and Chinese goods.

Timing Reflects Strategic Coordination Before G7 and EU-China Summits

The announcement of the upcoming meeting follows closely on the heels of Trump’s temporary extension of a 50% tariff threat on EU auto exports, now postponed until July 9 after a call with European Commission President Ursula von der Leyen. That extension aligns with preparations for a broader EU-China leadership summit in Beijing, during which high-level talks are expected to expand beyond trade to cover investment and geopolitical stability.

The in-person engagement between Sefcovic and Wang will cap off a diplomatic streak that began in late March with a Beijing visit and continued via a virtual conference on April 8 with Chinese Vice Premier He Lifeng. The frequency of meetings underlines the growing urgency of creating a buffer against U.S. trade policy, which is becoming a common external shock for both Brussels and Beijing.

China Seeks Closer EU Ties as U.S. Trade Pressure Mounts

In the face of rising tariffs, China has noticeably intensified efforts to cultivate deeper engagement with European stakeholders. Officials in Beijing are facilitating increased access for European executives and diplomats to senior decision-makers, while pledging improvements in the domestic business climate to attract foreign investment. These overtures reflect a broader strategy to prevent diplomatic isolation and to decouple trade tensions with the U.S. from relationships with other major markets.

However, despite China’s diplomatic charm offensive, European officials remain wary. There is growing sentiment within EU circles of “promise fatigue,” as long-standing issues such as state subsidies for Chinese firms and entrenched non-tariff barriers remain unresolved. These structural frictions continue to cast doubt on the credibility of Chinese commitments, especially as EU policymakers face domestic pressure to uphold fair trade standards.

Strategic Importance of EU-China Alignment in Trade Realignment

The evolving trilateral trade dynamic between the U.S., EU, and China is reaching a critical inflection point. While both Brussels and Beijing aim to avoid direct confrontation with Washington, their shared economic exposure to U.S. tariffs has become a mutual incentive for closer policy coordination. EU-China cooperation—if it materializes into concrete trade arrangements—could redefine global trade flows, particularly in sensitive sectors such as electric vehicles, semiconductors, and green technologies.

Ultimately, the success of this diplomatic push hinges on Beijing’s willingness to deliver substantive policy changes and the EU’s ability to leverage unified negotiation channels. With only weeks remaining before Trump’s tariff deadlines expire and global summits intensify, the outcome of the Sefcovic-Wang meeting in Paris may set the tone for a broader reconfiguration of international trade alliances in the post-pandemic, high-volatility economic era.

Source: Yahoo Finance

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Daniel Carter

Economic

Political

The cabinet on Tuesday approved the outlay for the economic package, which includes ¥288 billion in utility bill subsidies and ¥100 billion to help regional businesses ride out rising costs, according to a government document laying out the plan.

When combined with contributions such as enhanced access to loan programmes from the Japan Finance Corporation and insurance support, the overall scale of the programme is expected to reach around ¥2.2 trillion, according to Chief Cabinet Secretary Yoshimasa Hayashi. Utility subsidies and regional support are expected to add another ¥600 billion or so to that total.

The move comes amid growing concern that Trump's tariff policies could further strain Japanese businesses and dampen consumer sentiment. In April, following the imposition of new tariffs, Prime Minister Shigeru Ishiba pledged that the government would take all necessary steps to mitigate the economic fallout for industries and households.

The extensive support package is also seen as a strategic attempt to bolster public backing for Ishiba and his minority ruling coalition as a summer upper house election approaches. Recent opinion polls show the cabinet's approval rating at its lowest since Ishiba took office in October, with many respondents highlighting economic issues as their top concern.

“We will do everything possible to support small and medium-sized enterprises affected by the US tariff measures,” Hayashi said.

The government is expected to assemble additional relief measures, which may be financed through an extra budget to be compiled later this year.

Japan's key inflation rate has touched 3% for five straight months through April, driven primarily by rising food and energy costs. The price of rice has almost doubled and ill-advised remarks on the nation’s staple food have already cost a cabinet member's job.

To ease the burden on households, the government plans to reinstate subsidies for gas and electricity between July and September, following their phaseout in April.

Under the renewed programme, utility subsidies are expected to cut monthly electricity bills for the average household by around ¥3,000 over July to September, when demand typically peaks due to high summer temperatures, Hayashi said.

Tokyo is still engaged in trade negotiations with Washington even as Japanese exporters are hit by US tariffs, including a 25% duty on cars and auto parts.

Japan's top negotiator Ryosei Akazawa also spoke on Tuesday, suggesting that a meeting between Trump and Ishiba was in the cards for the Group of Seven summit meeting in Canada in mid-June, while cautioning against a rushed deal. Local media reports suggest Akazawa will be flying to the US again on Thursday for another round of talks with his counterparts.

“We will proceed with a sense of urgency while maintaining a steady pace, ensuring that negotiations do not result in harming national interests by being driven by a specific deadline,” he said.

Source: Theedgemarkets

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Economic

Forex

Broad-Based Weakness of the U.S. Dollar Reshapes Global Currency Dynamics

The global foreign exchange market is undergoing a notable recalibration as the U.S. dollar (USD) extends its steep decline, reinforcing trends that are favoring the Australian dollar (AUD) and the euro (EUR). This development signals deeper investor skepticism about the trajectory of U.S. economic policy, especially in the face of political volatility, fiscal uncertainty, and weakening macroeconomic indicators.

According to the May 26 market report by ACB Financial Markets Division, the AUD/USD and EUR/USD currency pairs are maintaining firm upward trends, supported by declining demand for USD assets. The report forecasts continued appreciation of both pairs into the final days of May, with structural and technical signals aligning to support sustained momentum.

AUD/USD Strengthens Amid Fiscal Concerns and Technical Breakout

The AUD/USD pair has recently broken above the critical 0.65 threshold, reaching its highest level since November 2024. ACB attributes this performance primarily to growing market concerns over U.S. fiscal strategy and the anticipated shift in Federal Reserve policy, especially given persistent signs of inflation deceleration and stagnating manufacturing output. These factors have deepened expectations that the Fed could pivot toward monetary easing.

Additional tailwinds for the AUD include speculation surrounding large-scale tax and spending reforms proposed by President Donald Trump. Market sentiment suggests these policies could significantly widen the federal deficit, adding to USD headwinds. From a technical standpoint, Friday’s close above the 200-day moving average supports further appreciation, with short-term resistance seen around 0.6640. ACB estimates a trading range between 0.6600 and 0.6640 for the week of May 26–30.

EUR/USD Gains on European Recovery and U.S. Policy Divergence

Similar optimism surrounds the euro, which has rallied to near 2025 highs around 1.1365. The EUR/USD pair is being lifted by encouraging signs of economic recovery within the eurozone and growing conviction that the Fed will reduce rates ahead of the European Central Bank (ECB). This perceived policy divergence has strengthened investor demand for the euro, viewed as a more stable alternative in the current geopolitical climate.

Additionally, rising trade tensions between the U.S. and EU—highlighted by recent tariff announcements from the Trump administration—have pushed capital flows toward Europe. Unlike the USD, which is losing its traditional role as a safe haven, the euro is benefiting from relative policy clarity and stronger macro fundamentals. ACB projects that the pair could soon test the 1.15–1.16 range, with an extended target of 1.1460 if current dynamics hold.

Currency Markets Now Reflect Central Bank Divergence

The divergent policy outlooks among major central banks are driving a realignment in currency valuations. The Federal Reserve faces intensifying pressure to cut rates amid signs of economic fatigue, while the ECB and Reserve Bank of Australia (RBA) have maintained more cautious and consistent approaches. This disparity is fueling the outflow of capital from USD-denominated assets into currencies perceived to offer better risk-adjusted returns.

ACB’s assessment suggests that barring any major surprises from upcoming U.S. data or sudden Fed policy shifts, both AUD and EUR will retain their upside trajectories in the short term. However, any unexpected economic shocks could quickly reset expectations and restore USD strength.

The current wave of USD depreciation reflects more than just technical adjustments—it is a response to deeper investor unease about American fiscal discipline, erratic trade policy, and the future of monetary easing. As AUD and EUR ascend in the global currency hierarchy, the dollar’s supremacy is increasingly contested. Should current trends persist, markets may be witnessing the early stages of a broader structural repositioning in global capital flows.

Source: ACB

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Economic

Tokyo Mulls Shift in Bond Strategy to Calm Debt Market Jitters

Japan’s Ministry of Finance (MOF) is poised to revise the structure of its government bond issuance plan for the current fiscal year, signaling a potential cut in the supply of super-long Japanese government bonds (JGBs). The adjustment comes in response to sharp yield spikes and a weakening demand base, raising fresh concerns about the sustainability of Japan’s debt dynamics amid domestic political pressures and external global uncertainties.

According to two sources with direct knowledge of internal discussions, the MOF will hold consultations with bond market participants through mid-to-late June before finalizing any shift in issuance. The overarching issuance size for fiscal 2025—set at ¥172.3 trillion (approximately $1.21 trillion)—will remain unchanged. However, the mix could lean toward shorter-term maturities if long-dated instruments such as 20-, 30-, and 40-year bonds are scaled back.

Market Relief and Immediate Impact on Yields

Markets reacted swiftly to the report. The 30-year JGB yield dropped by 12.5 basis points to 2.91%, its lowest since May 14, while the 10-year yield fell to 1.455%. The yen depreciated slightly against the dollar, sliding 0.3% to 143.275. Meanwhile, the move also had knock-on effects globally, pulling down U.S. 30-year Treasury yields by 7 basis points to 4.963%, highlighting the interconnectedness of sovereign bond markets in an era of volatile fiscal outlooks.

Strategists from Societe Generale welcomed the news, noting it reflected “market-imposed discipline” on bond issuance amid a widening gap between supply and demand in the super-long end. The decline in yields signals investor confidence that the MOF is prepared to step in and stabilize market expectations, at least in the near term.

Structural Imbalance and Political Pressures

The backdrop to the decision is fraught with structural risks. Japan continues to shoulder one of the largest public debt burdens in the world—well over 260% of GDP—and the JGB market has been destabilized by dwindling demand from traditional long-term holders such as life insurers. Compounding the challenge are political dynamics: Prime Minister Shigeru Ishiba faces calls for tax cuts and increased spending ahead of upper house elections in July. Although the ruling coalition has agreed to avoid issuing new deficit-financing bonds, discussions around another fiscal stimulus package are already underway.

This politically driven push for fiscal expansion collides with market concerns over debt sustainability, prompting increased scrutiny of both MOF’s bond issuance and the Bank of Japan’s role in yield stabilization.

The BOJ’s Delicate Balancing Act

The Bank of Japan has thus far refrained from making major changes to its bond tapering strategy but is watching developments closely. While no major alterations are expected before the end of the current fiscal year, the recent sell-off could influence the central bank’s stance for fiscal 2026, with details likely emerging at next month’s policy meeting.

In the short term, the possible cut in super-long bond issuance may ease immediate pressure on the upcoming 40-year JGB auction. Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust Asset Management, warned, however, that “this offers only temporary relief and won’t lead to a decline in Japan’s debt balance.”

While trimming the supply of super-long JGBs may offer breathing room to bond markets, it is unlikely to resolve Japan’s underlying fiscal vulnerabilities. The shift is a tactical move that underscores the government’s growing sensitivity to market feedback, but without parallel reforms to address debt accumulation, it cannot substitute for deeper structural changes. As Japan approaches key political and economic turning points, the focus must now turn from short-term market mechanics to long-term fiscal responsibility and policy coherence.

Source: Reuters

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Economic

Trade Tensions Cripple Southern California’s Supply Chain Backbone

Amid escalating trade tensions between the U.S. and China, the economic heart of America’s container logistics network is beginning to seize up. The ports of Los Angeles and Long Beach—handling more than one-third of all U.S. imported containers—are facing a significant downturn in activity as tariffs of up to 145% in April, now eased to 30%, prompt importers to cancel shipments and delay orders.

Truck drivers like Ruben Diaz, once able to run two container hauls daily, now struggle to find even two assignments per week. “I’m barely hanging on,” he said, with daily profits reduced to $50 after expenses. Diaz’s plight is a microcosm of the broader slowdown reverberating across California’s logistics-dependent economy.

Container Volume Plummets, Ripple Effects Spread

In May alone, inbound container ship calls to the two ports dropped by 17%, and those that did arrive carried significantly less cargo. Importers, seeking to avoid the 30% tariff, pulled back on orders from Chinese manufacturers—who accounted for $130 billion worth of goods through these ports last year. The volume collapse has strained the entire supply chain: from longshore workers and warehouse crews to pizzerias and import food suppliers.

The International Longshore and Warehouse Union (ILWU) reports that official dockworker shifts have been reduced to 3–4 days per week, with casual laborers facing complete unemployment. Surrounding businesses like Big Nick’s Pizza have seen revenues fall by 15%, as their core customers—port workers and truckers—stay home or cut back on spending.

Warehouses Fill, Jobs Vanish

Inland, the story is the same. Inland Empire, a major logistics hub east of Los Angeles, has grown from 7,340 warehouse workers in 2002 to nearly 140,000 in 2022. Now, many of those jobs are in jeopardy. At Waterfront Logistics’ 1.8-hectare facility near the port, goods like Vietnamese t-shirts, Chinese bottled water, and Italian sauces sit idle, waiting for warehouse space to clear.

For retail-facing suppliers like Santa Fe Importers, the economic fallout is immediate. “We’ve cut back working hours for about 50 employees and closed our lunch counter early,” said owner Vincent Passanisi, whose main clientele—port workers and drivers—have disappeared. He also fears that further tariffs on European Union goods could destroy demand for high-cost imported delicacies.

Tariff Cuts Offer Limited Relief

While the reduction in tariffs from 145% to 30% could reopen some supply lines, port authorities remain cautious. “A 30% tariff is still a major barrier,” said Gene Seroka, Executive Director of the Port of Los Angeles. “We are not expecting a sharp rebound anytime soon.”

Stephen Cheung, CEO of the Los Angeles County Economic Development Corporation, echoes this concern. “The LA–Long Beach port complex handles 35% of the country’s containerized maritime imports, with China as our top trading partner,” he said. “This trade conflict is the single largest threat to our region’s economy—and it keeps me up at night.”

The shockwaves of the U.S.–China tariff war are not confined to geopolitical rhetoric—they are materializing in dockyards, warehouses, and family budgets across Southern California. Even as political leaders work to defuse tensions, the deep interdependencies of global trade have already left scars on America’s busiest ports, where hundreds of thousands of livelihoods now hang in the balance.

Source: WSJ

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Economic

Japan Launches First Fiscal Response to Trump’s Tariffs

Japan is set to spend ¥900 billion (approximately $6.3 billion) on emergency economic measures aimed at cushioning the impact of U.S. tariffs, government sources confirmed on May 26. This marks the first direct financial response by Tokyo to U.S. trade actions under President Donald Trump, which have raised fears of an economic slowdown and higher living costs.

The overall support package could reach up to ¥2.8 trillion when including spending from local governments. The government’s primary focus will be subsidies to offset rising utility bills and financial aid for struggling businesses. The tariff regime is expected to raise import costs, weigh on corporate earnings, and reduce consumer purchasing power—especially during Japan’s energy-intensive summer season.

Utility Relief and Business Support in Focus

The emergency package, expected to be approved by the Cabinet on May 27, allocates ¥600 billion to help households cover electricity and gas bills this summer. The program aims to reduce household expenses by ¥1,040 in July and September, and by ¥1,260 in August—typically the hottest month of the year.

An additional ¥300 billion will be dedicated to financial support for small and medium-sized businesses dealing with declining profitability due to the trade disruptions.

Funding Strategy and Historical Context

To fund the measures, Japan plans to tap ¥388 billion from its emergency reserve fund and may utilize low-interest government loans. A similar utility subsidy program was introduced in 2023 under Prime Minister Fumio Kishida, amid soaring energy costs driven by the Ukraine conflict and yen depreciation, which inflated import prices.

This latest round of support reflects growing recognition in Tokyo that external shocks—particularly from trade tensions—require swift and targeted fiscal responses in addition to monetary tools.

Strategic Move Amid Global Uncertainty

Japan’s response signals a shift in policy posture, moving from reactive stabilization to proactive mitigation. While the immediate objective is to cushion households and businesses from tariff-induced pressures, the move also underscores Japan’s broader strategy to maintain domestic demand and production stability amid an increasingly fragmented global trade landscape.

The measures also come as Tokyo continues high-level discussions with Washington, hoping to secure concessions or exemptions from some of the harsher tariff penalties. However, the government appears to be preparing for prolonged volatility.

Japan’s ¥900 billion stimulus is more than just a one-off relief plan—it marks a strategic pivot toward fiscal resilience in the face of geopolitical and trade-related risks. Whether this package is sufficient to offset prolonged tariff pressures remains to be seen, but it sends a clear message: Japan is willing to act decisively to defend its economic stability and protect its households and industries from external economic shocks.