The “reciprocal tariff war” has entered the third stage, crypto assets have rebounded across the board, and BTC may quickly break through the previous high (05.05~05.11)

The information, opinions and judgments on markets, projects, currencies, etc. mentioned in this report are for reference only and do not constitute any investment advice.

Written by 0xBrooker

Since March, the "reciprocal tariff war" has become the most core factor affecting the global financial market, including the crypto market.

With the progress and degree of the "reciprocal tariff war" as the main parameters, and the changes in asset allocation preferences, consumer confidence, economic and employment expectations and even corporate profitability caused by the "reciprocal tariff war" as secondary parameters, predicting or observing the changes in these parameters has become the main way of market transactions.

This week, with the United States and Britain reaching a preliminary tariff agreement, the United States and China "successfully" completed their first contact, and the "reciprocal tariff war" gradually entered the third stage (reaching an agreement).

Whether in the U.S. stock market or the crypto market, forward-looking trading has dominated the market. Since the S&P 500 hit the bottom on April 7 and continued to rebound, it has paid for all the losses caused by the tariff war. BTC is even stronger. After a rapid rebound this week, it has paid for multiple technical indicators and is approaching its previous high.

In the context of the recovery of trading enthusiasm driven by positive news, Altcoins represented by ETH also started a sharp rebound this week. Previously weak ETH rose by 39.01% in a single week, recording the largest weekly increase since this cycle. eMerge Engine data shows that Altseason has begun.

The rebound has already occurred. Can market liquidity be restored to drive the market to reverse in Q2?

Policy, macro-finance and economic data

On May 8, US President Trump and British Prime Minister Keir Starmer announced the "Economic Prosperity Agreement" over the phone. The UK's auto and steel and aluminum tariffs were reduced in exchange for the UK opening its market to US agricultural products, but the 10% base tariff remained. The US is expected to increase export opportunities by $5 billion (including $700 million in ethanol and $250 million in other agricultural products) and receive $6 billion in tariff revenue.

The agreement is seen as the initial success of Trump's "reciprocal tariff" policy, and is interpreted by the market as "10% tariff increase + a certain amount of US goods import commitment" may be the US's expectation of a tariff war against most countries. This expectation is undoubtedly considered by the market to be basically acceptable to "reciprocal countries".

This judgment triggered bets from capital with higher risk appetite, driving a rapid rebound in the already oversold market.

In addition, over the weekend, US and Chinese trade representatives held their first public contact since the "reciprocal tariff war" in Switzerland.

Before the contact, Trump and US Treasury Secretary Benson both said that excessive tariffs actually ended trade and that China and the US would eventually reach an agreement. After the contact, both sides announced that they had made "substantial progress". The time and outcome of the US-China negotiations may depend more on the pressure from the US society, economy and finance, rather than the will of one party. This gives us reason to believe that rationality will eventually prevail over chaos.

Although the survey data are very poor, the economic and employment data in April are relatively good, and the financial performance of the "Big Seven" has not shown any major differences, which provides fundamental support for the sharp rebound of U.S. stocks.

U.S. stocks continued to rebound, U.S. Treasury yields remained stable, and gold prices rose and then fell.

The favorable policies on crypto assets in the United States also made important breakthroughs this week. On May 7, 2025, the Governor of New Hampshire signed the HB302 Act, authorizing state fiscal agencies to purchase Bitcoin and other digital assets with a market value of more than $500 billion directly or through exchange-traded products (ETP) (currently only BTC meets this standard). The bill allows up to 5% of state fiscal funds to be used to allocate assets such as Bitcoin and precious metals, and it is estimated that approximately $280 million in funds can be mobilized. On May 11, Arizona passed the Reserve Act, becoming the second state in the United States to establish a strategic reserve of Bitcoin.

With the breakthrough of the BTC reserve bill at the state level, more states are expected to join in. The passage of the federal reserve plan may only be a matter of time.

Crypto Market

Previously, BTC had rebounded for four consecutive weeks. This week, with the "reciprocal tariff war" entering the third stage, the positive factors within the industry and the compelling buying power, BTC rose by more than 10.46% this week.

Short-term moving average indicators show that BTC has formed an evenly rising arrangement. The 90-day moving average has turned upward, and the 360-day moving average continues to rise. More importantly, after returning to the "Trump bottom" last week, BTC jumped strongly to the "first rising trend line" of this cycle through a sharp rise on May 8. This means that forward-looking traders have basically completed the pricing correction affected by the "equal tariff war", which can be regarded as a phased reversal of the medium- and long-term market.

The main price pressure in the next stage comes from the upper edge of the "Trump bottom" - $11,000. Above that is the historical high.

It is worth noting that after BTC rebounded for five consecutive weeks, Altcoins saw a big surge this week, with ETH rising by more than 39.1% in a single week. If the rebound of Altcoins continues, or even reverses, it will mean the return of a period of abundant liquidity.

Funds In and Out

Following the massive inflow of funds last week, this week stablecoins and BTC Spot ETFs saw positive inflows in dual channels again, totaling $944 million, which became the material support for the explosion of the crypto market including BTC.

Specifically, there were capital inflows in 6 of the 7 trading days last week, which shows that the capital is very determined to buy at the bottom and push up prices.

In addition to the large inflow of funds, the leverage of funds on the exchange has also begun to increase, and the lending rate and lending interest rate have begun to rise. This means that the risk appetite of funds on the exchange is increasing.

Selling pressure and selling

After three months of chip cleaning, cost resetting, and the change of hands between long and short groups, the lock-in degree of chips has been greatly improved. We noticed that although it has been rising for 5 consecutive weeks, the selling pressure of BTC is gradually decreasing, which means that most of the short-term rebound traders have been cleared out, and the market reluctance to sell has increased, which makes it highly likely that BTC will rise sharply in the short term and break through the new high in the future.

As for long and short positions, as the price returned to $100,000 and liquidity was restored, the long-term group began to sell again, and the newly entered short-term group began to scramble for chips. The big buyers of this cycle, the shark group, continued to increase their holdings by more than 56,000 pieces this week.

At present, the floating profit of short-term hands has just exceeded 10%, and only 2% of the chips are in a loss state. The market is in a very safe state, and the BTC price is very likely to achieve a rapid breakthrough of the previous high.

Cycle Indicators

According to eMerge Engine, the EMC BTC Cycle Metrics indicator is 0.75, and BTC has returned to its rising phase.