The "reciprocal tariff war" has entered its third phase, and encryption assets have rebounded across the board, with BTC possibly quickly breaking through its previous high (05.05~05.11)

The information, opinions, and judgments regarding the market, projects, coins, etc. mentioned in this report are for reference only and do not constitute any investment advice.

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

Using 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, as well as the outlook for corporate profits triggered by the "reciprocal tariff war" as secondary parameters, predicting or observing changes in these parameters has become the main way of market trading.

This week, following the preliminary tariff agreement reached between the US and the UK, the US and China have "successfully" completed their first contact, and the "reciprocal tariff war" is gradually entering its third phase (reaching an agreement).

Whether in the US stock market or the crypto market, forward-looking trading has dominated the trend. Since the S&P 500 bottomed out on April 7 and has continued to rebound, it has completely recovered the decline caused by the trade war. BTC is even stronger, having rapidly rebounded this week and recovered multiple technical indicators, approaching its previous high.

Against the backdrop of a recovery in trading enthusiasm driven by positive news, Altcoins represented by ETH also started a significant rebound this week. The previously weak ETH surged 39.01% in a single week, marking the largest weekly increase since this cycle began. eMerge Engine data indicates that Altseason has begun.

The rebound has been achieved. Can the market liquidity be restored to drive a reversal in the market in Q2?

Policies, Macroeconomic Finance, and Economic Data

On May 8, U.S. President Trump and U.K. Prime Minister Keir Starmer announced via telephone the conclusion of an "Economic Prosperity Agreement." This agreement reduced tariffs on U.K. automobiles and steel and aluminum in exchange for the U.K. opening its market to U.S. agricultural products, but a 10% baseline tariff remains in place. The U.S. expects to gain $5 billion in export opportunities (including $700 million in ethanol and $250 million in other agricultural products) while also collecting $6 billion in tariff revenue.

The agreement is seen as a preliminary success of Trump's "reciprocal tariff" policy, while the market interprets it as "10% tariff increase + a certain amount of commitment to import U.S. goods" which may be the expectation of the U.S. in the tariff war with most countries. This expectation is undoubtedly considered by the market as "reciprocal countries" being generally acceptable.

This judgment has led to a higher risk appetite among capital, driving a rapid rebound in an already oversold market.

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

Before the contact, Trump and U.S. Treasury Secretary Mnuchin both stated that the excessive tariffs effectively terminated extremely unreasonable trade, and that China and the U.S. would ultimately reach an agreement. After the contact, both sides announced that they had "made substantial progress." The timing and outcome of U.S.-China negotiations may depend more on the pressures from U.S. society and economic finance than on the will of either party. This gives us reason to believe that rationality will ultimately triumph over chaos.

Although the survey data is very poor, the economic data and employment data for April are relatively good, and the performance of the "7 giants" in their earnings reports has not shown significant discrepancies, which provides fundamental support for the strong rebound of the US stock market.

The US stock market continues to rebound, US Treasury yields remain stable, and gold prices rise and then fall.

The positive developments in U.S. cryptocurrency asset policy also made significant breakthroughs this week. On May 7, 2025, the Governor of New Hampshire signed the HB302 bill, authorizing the state's financial institutions to purchase digital assets with a market capitalization of over $500 billion, such as Bitcoin, directly or through exchange-traded products (ETPs) (currently only BTC meets this standard). The bill allows up to 5% of state treasury funds to be allocated to assets like Bitcoin and precious metals, which is expected to mobilize approximately $280 million in funds. On May 11, Arizona passed a reserve bill, becoming the second state in the U.S. to establish a Bitcoin strategic reserve.

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

Cryptocurrency Market

Previously, BTC had rebounded for 4 consecutive weeks. This week, with the "reciprocal tariff war" entering its third phase, favorable conditions within the industry and pressing buying power have led to BTC rising over 10.46% this week.

The short-term moving average indicator shows that BTC has formed a uniformly upward arrangement. The 90-day moving average has turned upward, while the 360-day moving average continues to rise. More importantly, after returning to the "Trump bottom" last week, BTC has strongly surged past the "first upward trend line" of this period on May 8. This indicates that forward-looking traders have basically completed the pricing correction of the effects of the "reciprocal tariff war," which can be seen as a phased reversal of the medium to long-term market.

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

It is worth noting that after BTC rebounded for 5 consecutive weeks, Altcoins experienced a comprehensive surge this week, with ETH rising over 39.1% in a single week. If the rebound of Altcoins can be sustained, or even reversed, it will signify the return of a period of abundant liquidity.

Fund In and Out

Following a substantial inflow of funds last week, this week saw a dual-channel positive inflow of stablecoins and BTC Spot ETFs, totaling $944 million, which serves as a material support for the explosive growth of the cryptocurrency market, including BTC.

Specifically, in the last week, 6 out of 7 trading days recorded capital inflows, indicating a strong determination for capital bottom-fishing and pushing up.

In addition to the large inflow of funds, the leverage of on-site funds has also begun to increase, with both the borrowing rate and borrowing interest rate starting to rise. This indicates that the risk appetite of on-site funds is increasing.

Selling Pressure and Selling

After the past three months of chip cleaning, cost resetting, long and short hands changing hands, and the degree of chip locking has increased significantly. We have noticed that although it has risen 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, and the market reluctance to sell has increased, which makes it a high probability event for BTC to rise sharply in the short term and break through new highs in the future.

In terms of long and short positions, as the price returns to $100,000 and liquidity recovers, the long position group has begun to sell off again, while the newly entered short position group starts to compete for chips. Meanwhile, the major buyers of this cycle—the shark group—continued to increase their holdings by over 56,000 coins this week.

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

Cycle Indicator

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

EMC Labs, founded by cryptocurrency investors and data scientists in April 2023, focuses on blockchain industry research and investments in the Crypto secondary market. With a core competitiveness in industry foresight, insights, and data mining, it is dedicated to participating in the thriving blockchain industry through research and investment, promoting the welfare of humanity through blockchain and cryptocurrency.

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