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- Crypto markets may face pressure as Sri-Kumar warns U.S.-China trade tensions could lead to Fed rate hikes.
- Rate hikes could weaken investor confidence, creating volatility in cryptocurrencies and risk assets.
- U.S. trade strategy shift raises uncertainty, putting manufacturers and markets on edge.
Komal Sri-Kumar, the president of Sri-Kumar Global Strategies, warned that the recent tensions in trade between the United States and China may prompt the Federal Reserve to raise interest rates. This move would likely put pressure on cryptocurrencies and other risk assets. In the CNBC ‘s Power Lunch program, Sri-Kumar said inflation threats have emerged as likely to dominate the monetary policy, making a rate increase more likely despite theorists’ expectations of a rate cut.
Sri-Kumar’s comments have gone against the rising expectations pegged on the probability of lower rates from the Fed to boost growth. Crispus Nyaga, among the analysts, said that rate cuts were generally positive for Bitcoin and other digital currencies. However, the potential rates can cause the establishment of a new market top and prompt investors to lose their confidence, abandoning the continuation of their investments in crypto assets.
U.S.-China Trade Dynamics
The pair’s dynamics are outlined with the increasing tensions between the US and China taken into consideration. Although the US has recently toned down the issue of tariffs, as pointed out by Sri-Kumar, China has not made a meaningful contribution yet. He said that decision-makers in the U.S have failed to bring measurable promises of trade from China and diluted the stand on tariffs taken by US..
Such a change in the approach has resulted in increased risks and uncertainties in terms of trade and markets for the U.S government. Sri-Kumar described this as a bad negotiating strategy, as it creates uncertainty for the United States.
Therefore, foreign leaders and markets expect the threatening political utterances from Washington to fade as economic conditions in the country deteriorate, hence leading to more instability.
Crypto Markets in Uncertainty
This uncertainty is also raising problems for United States manufacturers to deal with. They fear that tariffs may be imposed again in the case of the failure of trade negotiations. However, despite the positive reactions from the markets to the signals coming from the White House, fundamental uncertainty persists. Firms are very cautious when it comes to making long-term commitments amid the uncertainty of trade relations with China.
Sri-Kumar’s message in general was one of caution. He also suggests that symptoms of volatility are going to become stronger due to unpredictable shifts in geopolitical fields and the ambivalent status of the Federal Reserve regarding inflation. Amid the growing tensions in trade, as well as when the Fed begins to make decisions, cryptocurrencies and other high-risk assets are going to be volatile.
