Comprehensive Analysis: Impact of U.S.-China Trade Deal on Cryptocurrency Markets
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U.S.-China Trade Agreement’s Unexpected Effect on Bitcoin and Ethereum
In a recent update on his Truth Social platform, former U.S. President Donald Trump announced reaching an essential trade agreement with China’s President Xi Jinping. Although the deal was expected to ease trade tensions, it surprisingly led to a significant downturn in Bitcoin and Ethereum prices, raising fears of a looming bear market in the cryptocurrency sector.
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Details of the U.S.-China Trade Arrangement
Trump disclosed that both parties had reached consensus on several critical issues, with more contentious matters nearing resolution. A significant outcome of the agreement was the cancellation of the proposed 100% tariffs and a reduction of existing tariffs from 57% to 47%. Despite these seemingly positive developments, the cryptocurrency market reacted negatively.
Market Response: Bitcoin and Ethereum Take a Hit
In the wake of the agreement, Bitcoin’s value plummeted to $107,000, while Ethereum fell to $3,700. This decline was unexpected given the anticipation that a U.S.-China trade truce could trigger a market rally. The initial trade tensions had already contributed to a $19 billion liquidation event earlier in October.
Market analysts suggest that the agreement’s effects might have already been factored in, leading to the broader market crash. The optimism that followed U.S. Treasury Secretary Scott Bessent’s announcement of a trade framework was short-lived, as the actual deal did not meet market expectations.
Influence of the Federal Reserve’s Stance
Adding to the market’s woes, comments from Federal Reserve Chair Jerome Powell further dampened spirits. During an FOMC press conference, Powell hinted that a December rate cut was not guaranteed, which contributed to bearish sentiment. Investors began to anticipate another 25 basis point increase at the next meeting, influencing cryptocurrency market dynamics.
Declining Demand for Bitcoin and Ethereum
A detailed analysis by CryptoQuant revealed a downturn in U.S. demand for Bitcoin and Ethereum, both in spot and derivatives markets. This decline is attributed to a phase of “profit-taking and cautious positioning,” as evidenced by ETF inflows, spot exchange premiums, and futures basis metrics.
Market Indicators Reflect Reduced Investor Confidence
The data showed that U.S. Bitcoin ETFs have shifted to being net sellers, with average outflows reaching concerning levels. Similarly, Ethereum ETF inflows have stalled since mid-August, highlighting waning investor confidence.
Furthermore, on U.S. crypto exchanges, spot demand has diminished. The zeroing of the Coinbase premium for Bitcoin and Ethereum signifies a noticeable dip in domestic buying pressure, traditionally associated with positive premiums and price rallies.
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