Firi Weekly: U.S.–China Political Tensions

U.S.-China Trade War Shows Signs of De-escalation:
- Trump signaled openness to reducing the threatened 100% tariffs on Chinese goods by November 1, calling them unsustainable, while planning a visit to China early next year.
Stripe and Paradigm's Tempo Blockchain Raises $500 Million:
- The new blockchain, targeting stablecoin transactions, secured funding at a $5 billion valuation despite not yet launching.
Three Major Japanese Banks Launching Yen Stablecoin:
- Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho Financial Group are reportedly collaborating on a yen-pegged stablecoin, potentially followed by a dollar version, which may boost crypto adoption in Japan.
Gold Outperforms Bitcoin Amid Market Volatility:
- Gold hit an all-time high of $4,380 per ounce with 59.9% year-to-date gains, versus Bitcoin’s 17.6%, driven by central bank purchases and geopolitical instability.

Last Week’s Big Three

A Volatile Trade War: The trade conflict President Trump reignited with China about a week and a half ago — as covered in last week’s Firi Weekly — showed signs of cooling over the past week despite several developments. Early in the week, the United States imposed elevated port fees on Chinese and China-built vessels calling at U.S. ports. Beijing responded swiftly with reciprocal measures targeting American and U.S.-manufactured vessels at Chinese ports. However, Trump later signaled openness to de-escalation, calling the planned 100% tariff hike on Chinese goods, set for November 1 atop existing duties, unsustainable. He also expressed optimism about U.S.-China relations and announced plans to visit China in early 2026.

Trump and Chinese President Xi Jinping are scheduled to meet in South Korea in late October as both nations work to negotiate a resolution to their trade dispute. With the November 1 deadline rapidly approaching, any developments on this front could generate significant market volatility.

Stripe and Paradigm’s Blockchain Raises $500 Million: Payment processing giant Stripe and prominent crypto venture capital fund Paradigm recently announced the imminent launch of their proprietary blockchain, Tempo, developed in partnership with leading technology and financial firms including Anthropic, Deutsche Bank, Shopify, and OpenAI. The blockchain will focus exclusively on stablecoin transactions. Last week, Tempo announced it secured $500 million in funding at a $5 billion valuation—a remarkable figure given the network has yet to launch.

The crypto community's reception of Tempo has been largely skeptical. It is argued that launching a new blockchain, rather than building on established decentralized networks with proven track records like Ethereum or Solana, unnecessarily fragments the ecosystem. Meanwhile, establishing meaningful network effects and gaining adoption from scratch remains a formidable challenge for Tempo. However, Stripe and its consortium partners possess unparalleled distribution capabilities across payments, enterprise software, and artificial intelligence sectors. If any group could successfully bootstrap a new blockchain network, this consortium arguably has the best chance of succeeding.

Three Largest Japanese Banks To Launch Stablecoin: According to Nikkei, Japan's leading business publication, the country's three largest financial institutions—Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Mizuho Financial Group—will collaborate to launch a yen-pegged stablecoin. The consortium may subsequently introduce a dollar-denominated stablecoin. This development follows an August report indicating that another firm had received regulatory approval from Japanese financial authorities to issue the first yen-denominated stablecoin, though that token has not yet launched.

A yen-denominated stablecoin represents a positive development for the digital asset industry. It enables Japanese citizens and other market participants to utilize stablecoins without exposure to dollar exchange rate fluctuations—an important consideration given that dollar-denominated stablecoins currently dominate the market. This could materially expand stablecoin usage in Japan's sophisticated financial market.

Behind the Charts

Chart 1: Bitcoin and Gold Prices, Year-to-date Price Performance

Last week not only brought concerns about the U.S.–China trade war but also fears of a regional banking crisis in the United States, echoing the turmoil in that sector from two and a half years ago. These banking concerns emerged last week after two U.S. regional banks disclosed fraud warnings and wrote down portions of their loan portfolios. While the situation does not appear to present systemic risk, markets began to fear potential contagion across the regional banking sector.

Following these developments, Bitcoin traded as low as $103,500 last week, while Ethereum fell to around $3,675 before both recovered. Gold, however, continued its strong performance throughout the tariff uncertainty and regional banking concerns, hitting a fresh all-time high of $4,380 per ounce. The gold rally appears partially driven by sustained central bank purchasing globally and heightened geopolitical instability. Year-to-date, gold has surged 59.9% compared to Bitcoin's 17.6% gain—meaning the traditional store of value has significantly outperformed "digital gold" so far this year.

Chart 2: Daily U.S. Bitcoin and Ethereum ETFs Net Flow

The U.S. Bitcoin and Ethereum ETFs have been the standout performers in the crypto market this year. Last week, however, they experienced net outflows totaling $1.23 billion for the Bitcoin ETFs and $311.8 million for the Ethereum ETFs. More conservative institutional investors appeared to reduce their exposure to risk assets amid the tariff turmoil and concerns about the potential U.S. regional banking crisis.

A Number to Remember

49.54%

This represents the year-to-date increase in total stablecoin supply, approaching a 50% gain in less than ten months—a substantial growth.

On Our Radar

Key developments we are monitoring for the week ahead:

What Happens Before November 1st? The period before November 1, when Trump threatens to impose an additional 100% tariff on China, warrants close attention. Developments on this front could generate significant market volatility in both directions.
Will U.S. Regional Bank Risks Spread? Whether the issues affecting U.S. regional banks will spread remains a critical question. Current evidence suggests these are isolated incidents, but contagion risk cannot be dismissed entirely.
U.S. Inflation Numbers on Friday: The U.S. Consumer Price Index (CPI) for September is expected to be released on Friday. This reading will largely determine whether the Federal Reserve (Fed), the U.S. central bank, cuts the federal funds rate at next week’s policy meeting. Markets currently price in a high probability of a rate cut, but higher-than-expected inflation could prompt the Fed to hold rates steady.

Mads Eberhardt21/10/2025

Should not be considered financial advice. Crypto may involve high risk.