As the global market enters a 90-day truce in US-China trade, a key question arises: Is this move sufficient to reshape global liquidity and provide the momentum needed for Bitcoin to break its historic high? Let’s delve into the potential impact of this trade truce on Bitcoin's future trends.
Tariff pressures ease, and the market breathes a sigh of relief.
From May 11 to 12, the United States and China announced a temporary end to the trade dispute, immediately alleviating tensions in global markets. After months of tariff increases and economic uncertainty, both sides agreed to suspend the implementation of new trade restrictions for 90 days.
The agreement was reached after talks in Geneva, involving significant reductions in existing tariffs and a series of commitments to revitalize bilateral trade. The US will reduce tariffs on $350 billion worth of Chinese imports from 145% to 30%, while China will reduce tariffs on $120 billion worth of US goods from 125% to 10%.
Highlights of the talks include China's commitment to resume purchasing Boeing airplanes, promising to import $50 billion worth of US soybeans and liquefied natural gas each year, and easing semiconductor export restrictions. Additionally, the US canceled the e-commerce exemption, and China committed to stricter controls on precursor chemicals for fentanyl.
Industries such as agriculture, energy, aerospace, and semiconductors are expected to benefit directly. Financial markets responded quickly, with the S&P 500 index rising 3.26% on May 12, and the US dollar index (DXY) falling 0.2% to 101.6, alleviating currency pressures in emerging markets and boosting risk assets overall.
With the easing of trade tensions, investors' risk appetite has rebounded, and market sentiment has improved significantly. Next, it will be worth watching how the shift in global trade patterns and the return of investors' risk appetite will affect cryptocurrency prices.
As risk appetite rebounds, Bitcoin breaks the 100,000 mark.
Following the announcement of the trade truce, the Bitcoin market reacted swiftly. On May 11, buoyed by optimism from the Geneva talks, Bitcoin's price climbed from around $100,000. The next day, stimulated by tariff reduction news, Bitcoin's price briefly reached $105,740, marking a new high in over a month.
This upward trend coincides with improved sentiment for risk assets, as the cryptocurrency fear and greed index rose from 59 the previous week to 70 on May 13, indicating a warming of market optimism, though it has not yet reached 'extreme greed' levels.
Since early April, Bitcoin's rally has been strong, rebounding from a low of $75,000 during the trade tensions, showing a V-shaped reversal. Spot Bitcoin ETFs have seen net inflows for four consecutive weeks, totaling nearly $6 billion, highlighting institutional confidence. Bitcoin has also risen 10% over the past week, with its price surge allowing it to surpass silver and Google, becoming the sixth largest traded asset by market capitalization globally.
At the same time, Ethereum also rose in tandem, trading at over $2,700, marking its best performance since December 2020. As of now, the total market capitalization of cryptocurrencies has also rebounded to $3.37 trillion, significantly bouncing back from the April low of $2.42 trillion.
Inflation cools, and expectations for interest rate cuts rise.
The signing of the US-China trade agreement is reshaping the macroeconomic landscape and creating new opportunities for cryptocurrencies like Bitcoin. Previously, tariffs were raised to over 100%, raising global inflation concerns and questioning the credibility of traditional inflation indicators. Now, as tariffs are gradually lifted, inflation pressures have eased, sending a key signal to monetary policymakers, which may also influence the price trends of assets like Bitcoin.
CPI data also confirms this trend, with the overall inflation rate falling year-on-year to 2.3% in April, below the expected 2.4%, and core CPI reaching 2.8%, in line with expectations. This marks the third consecutive month of declining overall inflation and the smallest year-on-year increase since February 2021. Federal Reserve Chairman Powell stated last week that the inflation outlook is optimistic, characterizing the impact of tariffs as 'transitory', while maintaining interest rates and emphasizing a data-driven policy stance.
This indicates that if inflation continues to cool, the Federal Reserve may have more room to cut interest rates, which would improve the liquidity environment for risk assets like Bitcoin and enhance the likelihood of Bitcoin breaking the $110,000 threshold. However, the current trade truce period is only 90 days, and future negotiations still face challenges in sensitive technology exports and AI governance.
In addition, geopolitical tensions, such as China's military activities near Taiwan, may drive investors towards traditional safe-haven assets like gold or the US dollar, thereby diminishing Bitcoin's appeal.
On-chain data insights for Bitcoin's trend.
According to on-chain data analysis, the cryptocurrency market is responding to changes in the macroeconomic environment. Renowned cryptocurrency analyst PlanB noted that the current market momentum closely resembles past bull market cycles. Bitcoin's RSI is currently at 70, and it is expected to remain above 80 in the future, aligning with bull markets in 2021, 2017, and 2013. An RSI above 80 typically indicates that monthly returns may exceed 40%. If this trend continues, Bitcoin's price could soar from the current $104,000 to $400,000.
Data from blockchain analysis firm Santiment further supports this view. Over the past 30 days, large holders holding 10 to 10,000 BTC have accumulated over 83,000 BTC, while small holders with less than 0.1 BTC have sold nearly 400 BTC. Santiment indicates that this divergence shows large holders are confident about the market outlook, while small holders may be taking profits.
Comprehensive on-chain data indicates that the market is becoming reactivated, showing a focused trend. However, relying solely on early signals does not guarantee the sustainability of market trends. Market cycles often begin to form before trends are confirmed, and weaker participants may exit prematurely. Therefore, investors need to remain cautious and avoid investments beyond their capacity.
Conclusion:
Although the US-China trade truce brings potential short-term upward momentum for Bitcoin, its long-term trend remains uncertain. After 90 days of negotiations, trade direction, geopolitical fluctuations, and macroeconomic policy adjustments will have profound impacts. Therefore, investors should maintain rationality while recognizing market uncertainties and cautiously assess and respond to potential risks.