President Trump is considering new sanctions on China's technology industry, which triggered a decline in traditional financial markets and a liquidation of $800 million in cryptocurrencies. The tariff threats caused general confusion, and sanctions could reignite the problem.
However, there may be a positive long-term aspect to all of this. Due to de-dollarization, investors across Asia are investing in Bitcoin, and the escalation of the trade war could move capital from dollars to cryptocurrencies.
How Will Trump's China Sanctions Affect Cryptocurrencies?
Over the past few months, Trump's tariffs have threatened the US-China trade war and negatively impacted the cryptocurrency market.
Failed negotiations led to a crash, agreements meant prosperity, and rumors had a strong impact on the entire market. Regardless of tariffs, Trump is reportedly considering sanctions on China, which threw traditional financial markets into a panic state:
BREAKING: US plans wider China tech sanctions with subsidiary crackdown.
— Markets & Mayhem (@Mayhem4Markets) May 30, 2025
The rule would cover subsidiaries of Chinese firms under US curbs.
US index futures are tanking on this news.
Here we go again! pic.twitter.com/FMNty6uarE
Specifically, these sanction plans target China's growing technology industry, aiming at subsidiaries of large companies like Huawei and semiconductor manufacturers.
Bloomberg reported that these sanctions may not be implemented until June, but cryptocurrencies reacted immediately. The entire market dropped 5%, Bitcoin fell below $105,000, and total cryptocurrency liquidations reached $827 million.
Even before today's sanction news, the market was wary of new tariffs and a cautious Federal Reserve. In early February, similar selling pressure caused Bitcoin to drop 6% due to global economic slowdown concerns from the trade war.
Today's actions reinforced these concerns, triggering declines in both stocks and cryptocurrencies.
While the US and China finalized tariff negotiations less than a month ago, the new sanction threat could reignite the same recession concerns.
China's leading economists warn that these measures could be a prelude to additional trade war, especially as the US targets China's largest growth industries. There are clear reasons for heightened tensions.
For example, on May 29th, the US already expanded export controls on chip design software, specific chemicals, and industrial tools heading to China, revoking existing licenses to block key semiconductor inputs.
As US-China technological friction intensifies, risk asset investors are viewing cryptocurrencies as volatility indicators for broader market sentiment.
BREAKING: President Trump says China has "totally violated its agreement with us."
— The Kobeissi Letter (@KobeissiLetter) May 30, 2025
In an apparent breakdown of the trade deal, Trump says "so much for being Mr. Nice Guy."
Did the US-China trade deal just collapse? pic.twitter.com/bEssPlOQIL
While another economic threat will clearly cause disruption, could there be a positive side for cryptocurrencies? As US economic policies become increasingly unstable, de-dollarization is gaining attention in Asia.
As part of this trend, the economy is moving from dollars to assets like gold, Chinese yuan, and cryptocurrencies.
In other words, if the US sanctions China again, investors across the region might park their capital in Bitcoin instead of dollars.
However, this could be a minor advantage, and the US is more integrated with the cryptocurrency market. There is much debate about how cryptocurrencies will perform during a US recession, and it's too early to draw definitive conclusions.
If Trump withdraws additional sanctions on China, the cryptocurrency market might return to normal, just like with tariffs, showing low volatility.
But if another trade war escalates, cryptocurrencies might behave in unexpected ways.
