VIX Hits Multi-Year Peak as Traders Price In More Fed Cuts After China Strikes Back With Tariffs

Markets Rattle as China Strikes Back With Tariffs, Bitcoin Volatility Climbs

Tensions between the world’s two largest economies are fueling fresh volatility across markets.

China’s sweeping retaliatory tariffs against U.S. imports on Friday triggered a sell-off in equities and sent volatility gauges soaring. Wall Street’s VIX index — often seen as a barometer of market fear — surged to 39, marking its highest level since October 2020, according to TradingView.

Bitcoin (BTC), often touted as a hedge during macro turmoil, saw its own turbulence. The largest cryptocurrency dipped to $82,500 after hitting a session peak of $84,600. Meanwhile, the Deribit DVOL index, which tracks BTC’s 30-day implied volatility, rose sharply to 54.6% annualized — a two-week high — signaling traders are bracing for bigger moves ahead.

As market nerves frayed, traders also recalibrated their expectations for Federal Reserve rate cuts. Fed funds futures now imply 116 basis points in cuts by year-end, up from 100 basis points before China’s move, per CME’s FedWatch tool.

The sudden spike in cross-market volatility highlights growing investor anxiety, as geopolitical friction and economic uncertainty collide — with crypto and traditional finance both feeling the heat.