Bitcoin and crypto prices have rocketed higher this week as a perfect storm gathers for risk assets

Bitcoin and crypto prices have rocketed higher this week as a perfect storm gathers for risk assets.

The price of bitcoin (BTC) has risen above $100,000 per bitcoin after U.S. president Donald Trump signaled the U.S. may be open to lowering the massive tariffs it slapped on China at the beginning of April.

"80% tariff on China seems right," Trump posted to his Truth Social account Friday morning, adding it’s “up to” Treasury secretary Scott Bessent who will be in Geneva, Switzerland for the talks.

"After carefully assessing the U.S. messages, China decided to agree to hold discussions," a spokesperson for the Embassy of the People’s Republic of China in the U.S. said earlier this week. “The talks are being held at the request of the U.S. side."

The bitcoin price has surged past $100,000 per bitcoin, breaking back above the closely-watched level for the first time since February.

"The market should be on alert that if neither side shows willingness to compromise, it could dampen the current risk-on mood and weigh on the bitcoin market heading into the weekend," said Yuya Hasegawa, crypto market analyst at Tokyo-based Bitbank, in an email Friday morning.

"Sentiment got an additional lift from the prospect of this weekend's trade talks between the U.S. and China," added David Morrison, senior market analyst at Trade Nation, in emailed comments. "While it is understood that these are preliminary discussions, investors are hoping that these negotiations will prove constructive, and lead to a timely resumption in bilateral trade.

"However, Morrison added, "there's a lot of good news already priced in. It's also the case that it takes time to reach trade agreements, and significant damage has already been done to global trade, with relations between the U.S. and China both frosty and uncertain. In other words, it wouldn't take much of a disappointment for investors to start reducing their exposure to equities."

U.S. trading partners could start dumping the massive stores of dollars and dollar-denominated assets they have accumulated since the Federal Reserve flooded the market through Covid-era lockdowns, analysts Stephen Jen, chief executive and co-chief investment officer at Eurizon SLJ Capital, and economist Joana Freire, warned in a Friday note.

Putting the number of at-risk dollars held by China, Taiwan, Malaysia, Vietnam and other major Asian exporters at $2.5 trillion, Jen and Freire add that the recent sudden spike in the value of the Taiwan dollar and other Asian currencies could be a prelude to a dollar sell-off.

"We continue to believe the risks of investors being blind-sided by such a non-linear sell-off in the dollar continue to rise," the pair wrote, in a note seen by MarketWatch. "There will be others, we predict, the overhang of liquid dollar holdings is just too large if the dollar weakens, the Fed cuts interest rates, and China stages a cyclical rebound."

The Fed, which kept rates on hold this week, is widely expected to begin cutting interest rates this summer after putting the loosening cycle begun in September on hold, with expectations growing for cuts totaling 75 basis points in 2025.

The stellar rally in the bitcoin price and the broader crypto market has also been fueled by a shift in macroeconomic thinking, with the potential for a rapid and large-scale selloff in the U.S. dollar now a key focus for investors.

As the dollar price drops, so too does the value of the dollar-denominated assets held by U.S. trading partners, such as China, Taiwan, Malaysia, Vietnam and other major exporters—a loss that could be in the $2.5 trillion range as the central bank massively expanded the U.S. money supply during the Covid-19 pandemic, according to Jen and Freire.

"The implication is clear: A 75 basis-point reduction in the U.S. federal funds rate over 2025, or even a 50 basis-point reduction, could trigger a massive and rapid selloff in the dollar and U.S. assets," the analysts said, in a note titled "’Devaluation Is Coming’ to an Unprepared World.’"

"The optimists would argue that the selloff in the dollar would benefit emerging-market (and other) assets, and we agree. But we fear that such a move could be messy, rapid and non-linear, in the same way that the dollar rally was in 2022."

The pair also noted that the recent, rapid appreciation of the Taiwan dollar, the Malaysian ringgit and the Vietnamese dong, among other Asian currencies, may be a sign of the coming selloff in the dollar.

"The optimists would argue that the selloff in the dollar would benefit emerging-market (and other) assets, and we agree," the analysts said in a Friday note, as quoted