China Tariffs Spike Volatility Across Markets, Lifting Rate-Cut Expectations
Volatility surged across both crypto and traditional markets on Friday following China’s retaliatory tariffs against the U.S., reigniting fears of a global economic slowdown and prompting traders to ramp up bets on Federal Reserve interest-rate cuts.
Bitcoin’s 30-day implied volatility, tracked by Deribit’s DVOL index, jumped to an annualized 54.6% — its highest level in two weeks — as investors reacted to mounting geopolitical tensions. The price of bitcoin (BTC) dipped 0.7% on the day, trading at $82,500 after touching intraday highs above $84,600.
Meanwhile, Wall Street’s closely watched CBOE Volatility Index (VIX), commonly referred to as the “fear gauge,” climbed to 39 — its highest reading since October 2020 — according to TradingView data. This marks a sharp rise in equity market anxiety.
The spike in volatility coincided with a steep sell-off in U.S. stock-index futures, which further pressured market sentiment. In response, traders increased their expectations for Federal Reserve easing, now pricing in 116 basis points of rate cuts for 2025 — up from 100 basis points before China’s announcement, according to the CME FedWatch tool.
The market now awaits upcoming U.S. jobs data, which could further shape expectations for monetary policy amid growing uncertainty in the global macroeconomic landscape.
