Can a 90-Day US-China Trade Truce Push Bitcoin to New Heights?

Is the latest 90-day trade truce between the US and China the secret sauce that could send Bitcoin soaring to new all-time highs? Let's dive into this thrilling twist in global economics and see how it might just shake up the crypto world!

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Markets Exhale as Tariff Pressures Ease

Hold onto your hats, folks! The US and China just hit pause on their epic trade battle on May 11-12, sending shockwaves of relief through global markets. After months of economic rollercoasters and tariffs piling up, they've agreed to chill out on new trade restrictions for the next 90 days.

After some intense talks in Geneva, they've not only hit the brakes but also rolled back some hefty tariffs. The US slashed duties on $350 billion of Chinese goods, dropping rates from a whopping 145% to a more manageable 30%. Not to be outdone, China cut tariffs on $120 billion of US products from 125% down to just 10%.

But wait, there's more! China's back in the market for Boeing planes and they're promising to snap up $50 billion worth of US soybeans and liquefied natural gas each year. Talk about reigniting some serious trade vibes!

And in tech land, both countries are easing up on semiconductor export restrictions during this truce. Plus, there are some sweet non-trade perks, like the US lifting an e-commerce exemption and China tightening controls on fentanyl precursor chemicals.

From agriculture to energy, aerospace to tech, these sectors are set to feel the love from this easing. No wonder the S&P 500 shot up 3.26% on May 12, and the US dollar index took a small dip, giving emerging markets a much-needed breather. But what about crypto?

Bitcoin Breaks Out as Risk Appetite Returns

Bitcoin didn't waste a second responding to this news. Even before the official word dropped on May 11, BTC was flirting with $100,000, buzzing with optimism from the Geneva talks. Then, boom! On May 12, as the tariff cuts went live, Bitcoin rocketed to $105,740, its highest in over a month. As we speak, it's hovering near $104,400, up almost 2% in the last day.

This surge is riding the wave of renewed risk appetite across the board, and it's got the Crypto Fear and Greed Index jumping from 59 to 70. Sure, we're not in "Extreme Greed" territory yet, but the market's definitely buzzing.

Since hitting a low of $75,000 amid trade tensions in early April, Bitcoin's staged a near V-shaped comeback. And guess what's fueling it? A flood of cash into spot ETFs, showing that the big players are all in.

Just last week, Bitcoin jumped 10%, thanks to heavy demand from the pros. Spot Bitcoin ETFs have seen three straight weeks of net inflows, clocking in over $5.8 billion. That's right, Bitcoin's now outshining both silver and Google, ranking as the sixth-largest tradable asset globally.

Ethereum's not far behind, up nearly 44% to around $2,560, its best performance since December 2020. And the total crypto market cap? It's bounced back to $3.32 trillion from April's low of $2.42 trillion. Trade tensions? What trade tensions?

Inflation Cools, Rate Cut Odds Rise

Hold up, there's more to this story. The US-China trade truce is starting to chill out the broader economic scene, which could be a game-changer for crypto, especially Bitcoin.

Before the truce, tariffs were sky-high, pushing fears of a global inflation spike. But with tariffs now coming down, those fears are starting to fade. And that's good news for everyone keeping an eye on monetary policy.

If inflation keeps cooling as expected, the Fed might just cut interest rates, giving risk assets like Bitcoin a nice liquidity boost. And guess what? April's CPI data just dropped, showing inflation at a cool 2.3% year-on-year, below the expected 2.4%. That's the third straight monthly drop and the smallest increase since February 2021.

BREAKING: April CPI inflation FALLS to 2.3%, below expectations of 2.4%.

Core CPI inflation was 2.8%, in-line with expectations of 2.8%.

This marks the 3rd straight monthly decline in headline inflation.

Inflation continues to cool down despite the trade war.

Fed Chair Jerome Powell called the inflation picture "good" and said the tariff-driven price effects are "short-lived." The Fed's holding steady at 4.25% to 4.5%, but they're watching the data closely.

So, if CPI keeps coming in soft and Powell stays dovish, Bitcoin might just break through $110,000. But remember, this truce is only for 90 days, and tough talks are looming, especially around tech and AI. Plus, keep an eye on geopolitical moves, like China's military action near Taiwan. If the dollar index jumps to 105 or higher, Bitcoin's shine might dull a bit.

Experts Split on What's Driving the Next Crypto Move

So, what do the crypto gurus think about this 90-day trade truce? We've got some hot takes from industry insiders.

Charles Wayn from Galxe thinks this truce is more than just a quick fix. He believes it's cleared a major hurdle, setting the stage for a more robust crypto cycle. "The US/China trade tariff hiatus signals a shift toward improved macro sentiment that will float all boats, especially crypto," he says. And he's not just talking about Bitcoin; he's seeing a surge in altcoins too, with ETH up over 30%.

But not everyone's on the same page. Kai Wawrzinek from Impossible Cloud Network warns that there are still big infrastructure risks lurking. He's worried about ongoing uncertainty around chip access and cloud dependencies. "A temporary trade deal between the US and China is not enough to bring the clarity and certainty needed by the global cloud industry," he argues. He points out that even with some tech concessions in April, major players like Microsoft and Amazon are still holding back on data center spending.

Wawrzinek sees a silver lining though: this might be the perfect moment for decentralized infrastructure to shine. "Decentralized networks resist almost all of the risks associated with centralized providers," he explains, hinting at a big opportunity for decentralized tech.

On-chain data is also telling its own story. PlanB, a renowned crypto analyst, sees strong parallels to past bull runs. "Bitcoin RSI is at 69. I expect at least four months with RSI 80+, just like in previous bull markets," he predicts, suggesting Bitcoin could hit $400,000.

And blockchain analytics firm Santiment's seen a clear split in wallet behavior. Over the last 30 days, big holders have scooped up over 83,000 BTC, while smaller wallets have been selling off nearly 400 BTC. "The aggressive accumulation from these large wallets could indicate confidence that Bitcoin may soon test its $110,000 all-time high again," Santiment notes, though they caution smaller holders seem to be cashing in.

The market's re-engaging, no doubt about it. But remember, early signs don't guarantee a sustained trend. Stay sharp, and never bet more than you can afford to lose.