China Tariff Shock Sends Wall Street’s Volatility Index Soaring, Boosting Bets on Fed Easing

China’s Tariff Retaliation Sparks Volatility Surge, Bitcoin Slips Below $83K

A fresh round of global market jitters gripped investors on Friday after China fired back at the U.S. with sweeping retaliatory tariffs, worsening risk sentiment and fueling bets on aggressive Federal Reserve rate cuts.

Wall Street’s fear barometer — the CBOE Volatility Index (VIX) — spiked to 39, hitting its highest level since October 2020, according to TradingView data. The move came alongside sharp declines in equity index futures, as traders digested the implications of deepening trade tensions.

Bitcoin (BTC), often touted as a macro hedge, wasn’t spared. The leading cryptocurrency slid 0.7% to $82,500 after an earlier rally to $84,600 lost steam. According to Deribit, BTC’s 30-day implied volatility — tracked via the DVOL index — surged to 54.6% annualized, the highest level in two weeks, signaling rising expectations for short-term price turbulence.

Meanwhile, market participants increased their rate-cut wagers. The CME FedWatch tool now reflects expectations of 116 basis points in Fed cuts by year-end, up from 100 bps before China’s announcement.

While Bitcoin remains relatively resilient compared to equities, the macro backdrop continues to exert pressure on digital assets — and investors are watching closely to see if further monetary easing will provide support.

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