Reason analysis: Why did the price of Bitcoin (BTC) fall after Trump announced the US-China tariff agreement?

Source: Cointelegraph Original text: "Reason Analysis: Why Bitcoin (BTC) Prices Fell After Trump Announced the US-China Tariff Agreement"

Key points:

Bitcoin (BTC) lagged behind as investors turned to the stock market after an agreement was reached between the U.S. and China that could potentially end the current trade war.

Macroeconomic conditions are shifting from gold investment to the stock market.

Bitcoin (BTC) reached its highest price in over three months at $105,720 on May 12, but failed to maintain its bullish momentum. Notably, the drop to $102,000 occurred after a temporary easing of the US-China tariff conflict. This phenomenon has left traders puzzled as to why Bitcoin reacted negatively to this seemingly positive development.

The 90-day trade truce has lowered import tariffs on both sides. U.S. Treasury Secretary Scott Bessent stated that if both sides demonstrate sincere efforts and maintain constructive dialogue, the agreement could be extended. According to Yahoo Finance, the topics discussed by both sides include "currency manipulation," "steel price dumping," and restrictions on semiconductor exports.

One of the reasons for Bitcoin's (BTC) recent lack of momentum can be attributed to its significant 24% increase over the past 30 days, while the S&P 500 futures rose only 7% during the same period, and gold remained stable. Investment analysts believe that investors currently lack sufficient reasons to expect Bitcoin to further diverge from traditional markets, especially considering that its 30-day correlation coefficient with the stock market remains as high as 83%, which is a key indicator.

It is noteworthy that Bitcoin's market value has successfully surpassed that of silver and Google, two major traditional assets, and it has now risen to become the sixth largest tradable asset in the world, demonstrating its increasing importance in the global financial market.

The news that Strategy increased its holdings by 13,390 bitcoins from May 5 to May 11 has once again raised concerns among investors. With BlackRock and Strategy together holding 1.19 million bitcoins, accounting for about 6% of the circulating supply, some traders are worried that Michael Saylor's company has effectively become a major force supporting the price of bitcoin.

Critics like Peter Schiff predict that the continually rising average purchase price of Strategy may eventually lead to losses, forcing the company to sell part of its holdings to cover borrowing costs. However, this scenario seems unlikely to materialize, as the company has doubled its capital increase limit to $21 billion in equity financing and $21 billion in debt financing.

Although traders often focus on events specific to Bitcoin, the most likely reason for the weakness around $105,000 is the broader macroeconomic environment. While the suspension of tariffs directly benefits the stock market, it has a certain negative impact on scarce assets like Bitcoin. For example, as demand for safe-haven assets declines, gold prices fell by 3.4% on May 12.

Gold prices have historically shown an inverse relationship with the U.S. Dollar Index (DXY), which climbed to its highest level in 30 days on May 12. Despite a 0.3% decline in the U.S. Gross Domestic Product (GDP) for the first quarter and a 6.1% month-over-month surge in pending home sales in March, the strong dollar still reflects investor confidence in the market.

As the price of Bitcoin approaches $105,000, investor confidence is lacking, partly due to weakened demand for scarce assets, as investors generally believe that the stock market is a more direct and quicker beneficiary of the US-China trade agreement. Lower tariffs mean that companies are expected to achieve revenue growth and improved profit margins.

Given that from May 1 to May 9, U.S. Bitcoin exchange-traded funds (ETFs) attracted inflows of up to $2 billion, the likelihood of Bitcoin's price falling below $100,000 remains low. After a monthly increase of 24%, demand for Bitcoin remains robust, indicating that the current market is driven by institutional adoption rather than retail fear of missing out (FOMO), which is very favorable for price trends.

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