Crypto market slides as trade tensions, Fed decision and earnings season unsettle investors
The cryptocurrency market started the week under pressure, with major coins extending their weekend decline as a mix of macroeconomic and geopolitical risks weighed on sentiment. Traders are juggling renewed fears of a trade war, uncertainty over the upcoming Federal Reserve interest rate decision, and a crucial wave of US corporate earnings that could reshape risk appetite across global markets.
Bitcoin (BTC) and leading altcoins retreated over the weekend, mirroring a broader pullback in risk assets. BTC slipped toward the $88,700 area, while Ethereum (ETH) fell to around $2,930. Popular altcoins such as Dogecoin (DOGE) and Solana (SOL) also moved lower, each shedding more than 1% over the same period. The declines came even as the Fear and Greed Index for crypto remained pinned in the “fear” region, signaling that caution, not capitulation, is dominating the market mood.
Trade war worries return to the spotlight
A key driver behind the latest dip is the reemergence of trade war fears, this time centered on tensions between the United States and Canada. President Donald Trump has threatened to enact a 100% tariff on Canadian imports into the US, a move that would mark a dramatic escalation in trade frictions between the two neighbors.
The dispute is tied to Canada’s evolving relationship with China and a fresh trade arrangement that lowers tariffs on Chinese electric vehicles (EVs). Under the agreement, Canada is poised to cut tariffs on 49,000 imported EVs from 100% to just 6%. In return, China will reduce its levy on Canadian canola exports, easing pressure on a key Canadian agricultural sector.
For crypto markets, the direct link may not be obvious at first glance, but the implications are significant. The US and Canada share one of the largest bilateral trading relationships in the world. Any serious disruption to that flow increases uncertainty around economic growth, corporate profits, and global supply chains. When trade tensions rise, investors tend to de-risk, pull back from volatile assets, and gravitate toward cash or safe-haven instruments. Crypto, still largely viewed as a high-beta risk asset, often suffers in such environments.
Some analysts argue that a worst-case scenario might still be avoided. They point to a pattern often summarized by the acronym “TACO” – Trump Always Chickens Out – implying that aggressive tariff threats do not always materialize into full-scale policy. In addition, legal and institutional checks remain in play: the US Supreme Court could potentially rule against certain unilateral tariff moves if they are found to overstep legal boundaries. Despite these caveats, even the threat of sweeping tariffs is enough to keep risk markets, including crypto, on edge.
Fed decision looms over the market
If trade tensions are one headwind, monetary policy is another. The next major catalyst for crypto comes mid-week, when the Federal Reserve announces its latest interest rate decision. Consensus among economists is that the Fed will hold its benchmark rate steady in the 3.50%–3.75% range. Prediction markets place the odds of no change above 98%, indicating that a surprise move on rates themselves is highly unlikely.
However, for investors, the decision is about much more than the headline rate. What matters is the guidance the Fed provides on the path of monetary policy for the rest of the year. Markets are intensely focused on hints about future rate cuts, the timing of any easing cycle, and how aggressively the central bank is prepared to support growth if economic data deteriorates.
Crypto assets, like high-growth tech stocks, tend to benefit in environments where borrowing costs are falling or expected to fall. If the Fed signals that more cuts are likely later this year, that could reignite risk-taking behavior and potentially trigger a relief rally across digital assets. Conversely, if policymakers strike a hawkish tone—emphasizing inflation risks and downplaying the prospects of additional cuts—the market may interpret that as a reason to stay defensive.
Complicating matters further are upcoming changes at the Federal Reserve itself, including the appointment of a new Chair. Any shift at the top of the central bank often leads markets to reassess policy trajectories, communication styles, and tolerance for inflation versus unemployment. Crypto traders are watching closely, knowing that a more dovish or more hawkish Chair could significantly reshape the macro backdrop for digital assets over the next few years.
Corporate earnings: a key test for risk appetite
Alongside trade and monetary policy, the next wave of US corporate earnings is poised to influence crypto performance. Some of the world’s most valuable companies, including members of the so-called “Magnificent 7” such as Apple, Microsoft and Meta Platforms, are reporting results. These firms are not only bellwethers for the US stock market; they are also among the biggest spenders in artificial intelligence and digital infrastructure.
Strong earnings from these giants tend to bolster risk sentiment. Robust results, optimistic forward guidance and healthy capital expenditure plans in areas like cloud computing and AI can convince investors that growth remains resilient. That, in turn, can spill over into crypto, especially into tokens linked to AI infrastructure, data storage, and high-performance computing.
On the other hand, disappointing earnings or cautious commentary about the macro environment may trigger a risk-off wave, pushing both stocks and crypto lower. For many traders, these earnings reports are less about individual companies and more about the broader question: is the US economy strong enough to withstand tight monetary policy and geopolitical uncertainties? The answer helps shape how much risk investors are willing to take across all asset classes.
Government shutdown risk and regulatory fog
As if trade disputes, Fed policy and earnings were not enough, traders are also monitoring the possibility of a US government shutdown. Political gridlock in Washington can lead to delays in budget approvals, affecting everything from federal workers’ paychecks to the operations of regulatory agencies.
For crypto, a shutdown could have two opposing effects. In the short term, it may feed a narrative of institutional dysfunction, undermining confidence in traditional governance and prompting some investors to consider decentralized alternatives. At the same time, a shutdown might slow regulatory processes, including approvals, enforcement actions or rulemaking that the industry is eagerly awaiting for clarity.
One development that remains on traders’ radar is the progress of the so-called CLARITY Act, which aims to provide clearer rules around digital assets and their treatment under existing financial regulations. Any movement—positive or negative—on such legislation can reshape expectations about how easily crypto companies can operate, list tokens, or interact with traditional financial institutions. Even modest advances toward a more defined regulatory framework can have an outsized impact on valuations, as they reduce uncertainty and long-term legal risk.
Why macro events hit crypto harder than many expect
The current environment highlights how deeply intertwined crypto has become with the broader financial system. In its early years, Bitcoin was often framed as an uncorrelated hedge, isolated from traditional market dynamics. Over time, however, institutional adoption, the growth of Bitcoin ETFs, and integration with major trading platforms have pulled crypto into the same macro orbit as equities and other risk assets.
When bond yields move on the back of Fed expectations, or when stock indices react sharply to trade headlines, crypto frequently amplifies those moves. High leverage in derivatives markets, 24/7 trading and a large share of speculative capital means digital assets can swing more violently in response to the same news that nudges stock markets. The latest decline ahead of the FOMC meeting and earnings season fits this pattern: traders are de-risking not because of a crypto-specific shock, but because the global macro narrative has become more fragile.
At the same time, this integration cuts both ways. When conditions turn favorable—rates fall, earnings beat forecasts, and geopolitical tensions cool—crypto has historically rebounded faster than many traditional assets. For investors with higher risk tolerance and longer time horizons, these macro-driven pullbacks can present opportunities to accumulate positions at more attractive levels, provided they understand the underlying volatility and can manage drawdowns.
Sentiment indicators: fear persists, but panic is absent
The fact that the Fear and Greed Index remains in the “fear” zone, rather than plunging into “extreme fear,” is telling. It suggests that the market is cautious but not in full-blown capitulation. Trading volumes have thinned in some segments, and leverage has been gradually reduced, but there has not yet been the kind of forced liquidations or widespread distress that typically accompany major market bottoms.
For disciplined traders, this environment demands nuance. Purely momentum-driven strategies may struggle as prices churn sideways with a downward bias, while macro catalysts remain unresolved. On the other hand, systematic accumulation strategies—such as dollar-cost averaging—may benefit from the muted yet persistent fear that keeps valuations from overheating. The key is distinguishing between short-term noise sparked by headlines and longer-term shifts in fundamentals like network usage, developer activity and institutional inflows.
How traders are positioning into the FOMC and earnings
In the run-up to the Fed decision and key earnings releases, many market participants are opting to hedge or reduce exposure. This can mean rotating out of smaller, illiquid altcoins and into larger caps like BTC and ETH, which typically hold up better during bouts of volatility. Some traders are also turning to stablecoins as a temporary safe harbor, waiting for clearer signals before redeploying capital.
Derivatives markets provide additional insight. Implied volatility often rises ahead of major events, reflecting expectations of larger price swings. In such conditions, options strategies—like straddles or strangles—become popular among sophisticated traders seeking to profit from volatility itself rather than making a directional bet. For long-only investors, the main task is more straightforward: avoid overreacting to each headline, while staying alert to genuine regime shifts in monetary policy or regulation.
Long-term implications of trade and policy shifts for crypto
Beyond the immediate price action, the current mix of risks raises deeper questions about crypto’s role in a changing global order. Persistent trade conflicts and tariff battles may accelerate efforts by some countries to reduce reliance on the US dollar and explore alternative financial rails. While this de-dollarization narrative is often overstated, it does create a backdrop in which digital assets, stablecoins and decentralized payment networks could gain traction as neutral settlement layers.
Similarly, the Fed’s balancing act between controlling inflation and sustaining growth affects the appeal of Bitcoin’s fixed supply narrative. If inflation fears resurface or trust in central bank management wanes, the case for Bitcoin as a store of value could strengthen, even if shorter-term price action remains correlated with risk assets. That tension—between macro-driven volatility and a long-term monetary thesis—lies at the heart of many current debates among crypto investors.
What to watch next
In the coming days, several developments will be critical for the crypto market:
– The language of the Fed statement and press conference, especially any references to inflation risks, growth concerns or the timing of future rate cuts.
– Market reaction to earnings from mega-cap tech and AI leaders, and whether their guidance supports a continued risk-on environment.
– Any escalation or de-escalation in tariff rhetoric between the US and Canada, as well as broader trade relations involving China.
– Progress—or setbacks—on US regulatory initiatives like the CLARITY Act, along with signals from regulators about their stance toward digital assets.
– Changes in on-chain activity, ETF flows and derivatives positioning, which can confirm whether the current dip is driven mainly by macro fears or by structural shifts within crypto itself.
Taken together, these factors explain why the crypto market is on the back foot ahead of the FOMC decision and earnings, and why volatility may stay elevated in the short term. While the immediate bias points to caution, the same forces that are fueling fear today could set the stage for a sharp rebound if monetary policy, earnings and trade developments break in crypto’s favor over the weeks and months ahead.