The tariff conflict between the United States and China, a major source of anxiety in the markets throughout October, was resolved. Despite this positive development, Bitcoin failed to recover last week, recording a weekly drop of 1.72%.
The cryptocurrency market’s inability to respond to clear positive news indicates a deep weakening of its bullish momentum. Ethereum fell 2.55% over the week, while Solana (SOL) also fell 4.76% over the same period.
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Geopolitical gains against the fall of cryptocurrencies
The crucial period for cryptocurrency investors was between October 29 and 30. This period spanned the Federal Reserve meeting and the high-stakes summit between US President Donald Trump and Chinese President Xi Jinping.
China agreed to three major US demands, including a one-year delay in restrictions on rare earth exports and the resumption of imports of US soybeans. As a result, the US-China summit yielded considerable clarity. In exchange, the United States agreed to reduce the overall tariff rate applied to China from 57% to 47%. The leaders also agreed to conduct reciprocal visits next year.
The resolution was immediately reflected in traditional safe haven assets. For example, the price of gold, which had soared after the tariff dispute escalated on October 10, retreated to its pre-escalation level of about $3,990 per ounce over the weekend.
The Nasdaq 100 index, a key gauge of risk assets, rose about 2.7% from its Oct. 10 low. Dissolved geopolitical risk and strong corporate earnings drove this gain.
However, the price of Bitcoin has had major problems. On Sunday afternoon UTC, Bitcoin was trading near $110,000, a 9.4% drop from its price on October 10.
On-chain analysts attribute Bitcoin’s weak trajectory to the loss of momentum caused by the October 10 crash. Approximately $19 billion in derivatives market leverage was liquidated in this event, depleting the primary fuel for the recent rally.
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Powell’s warning nullifies trade truce
The other significant event was the Federal Reserve’s rate announcement on October 29. The Federal Reserve’s FOMC reduced the benchmark interest rate by 0.25 percentage points and announced the termination of quantitative tightening (QT) as of December 1: fundamentally positive news for risk assets.
However, Chairman Jerome Powell injected new uncertainty by suggesting that the Federal Reserve may not implement a rate cut at the December FOMC meeting. This was the first time Powell had offered such a concrete opinion on next month’s decision.
Before the FOMC, the CME FedWatch tool showed a 91.5% probability of a rate cut in December. Powell’s comments caused this probability to drop to 55%, causing an immediate 2% drop in the price of Bitcoin. Although the FedWatch probability has since recovered to 70.4% as of Sunday, the outlook remains very ambiguous.
Federal Reserve Officials Back Powell; New uncertainty looms
Since then, several Fed officials have publicly supported Powell’s stance. Atlanta Fed President Raphael Bostic said Powell’s message accurately conveyed the diverse views within the Fed and expressed appreciation for the president’s willingness to signal a possible hold on rates in December.
In short, while the US-China summit managed to reduce geopolitical uncertainty in October, the Federal Reserve has introduced a new layer of ambiguity regarding the future of monetary easing.
Consequently, macroeconomic indicators such as inflation and employment data will regain significant influence this week. The Altcoin seasonal index, an indicator of cryptocurrency market uncertainty, hit 41 on Sunday, its lowest level since the second week of August.
Next week: a lot of macroeconomic data
A busy schedule of employment data releases will dominate the week, with the JOLT Job Openings and Labor Turnover Survey due on Tuesday, ADP Nonfarm Employment on Wednesday, Jobless Claims on Thursday, and the Michigan Inflation Expectations Index on Friday. Better-than-expected employment data will increase the likelihood of rates being held in December.
Public statements by several Fed officials, including Governor Lisa D. Cook (Monday), Vice Chair Michelle W. Bowman (Tuesday), and Governors Michael S. Barr and Christopher J. Waller (Thursday), are also expected to move the market.