Bitcoin’s price took an unexpected dip today as investors redirected their focus towards stocks following a significant development in the U.S.-China trade landscape. On May 12, Bitcoin reached a three-month peak at $105,720, only to retrace to $102,000 after the announcement of a temporary trade truce between the two economic powerhouses. The shift has left market participants scratching their heads, as such geopolitical easing typically bodes well for riskier assets like cryptocurrencies. For more context on how trade negotiations impact Bitcoin, see Bitcoin Traders Eye Breakout to New Highs as Trump Says Tariff Deals Progressing.
A Tug-of-War Between Markets
The latest trade agreement, which reduces tariffs and opens doors for further dialogue on contentious issues like currency manipulation and semiconductor export restrictions, seems to have swayed investor interest away from Bitcoin and towards equities. “With the truce in place, stocks are back in vogue,” noted crypto analyst Sarah Wellington. “Investors are eyeing potential profit margins improvement for companies, thanks to reduced import duties.”
The broader economic context is also contributing to Bitcoin’s sluggish performance. Over the past month, Bitcoin has enjoyed a 24% increase, while S&P 500 futures climbed 7%, and gold remained largely stagnant. The digital currency’s correlation with the stock market, standing at a robust 83%, suggests that as equities strengthen, Bitcoin may find it challenging to carve its own path.
Market Dynamics and Investor Concerns
Interestingly, Bitcoin’s recent market cap milestone, surpassing both silver and Google to become the sixth-largest tradable asset globally, hasn’t insulated it from market volatility. A significant factor weighing on Bitcoin’s trajectory is the concentration of holdings. Strategy’s acquisition of 13,390 BTC early this month has intensified discussions around market manipulation and asset support. Critics like Peter Schiff argue that Strategy’s increasing average purchase price could backfire, yet the company’s expanded capital limits seem to negate immediate financial pressure.
Meanwhile, macroeconomic winds are blowing in favor of stocks over traditionally safe-haven assets like gold, which dropped 3.4% in tandem with Bitcoin’s decline. The strengthening US Dollar Index, which hit a 30-day high, further underscores the market’s current preference for equities over scarce assets.
What Lies Ahead for Bitcoin?
Despite the recent sell-off, Bitcoin’s future isn’t bleak. Institutional interest remains robust, as evidenced by the $2 billion inflow into US spot Bitcoin ETFs in just the first nine days of May. This institutional backing could provide a cushion against potential price drops below the $100,000 mark. “It’s not retail FOMO driving the market this time,” Wellington observed, “but rather a strategic alignment by big players.” This optimism echoes sentiments from Bitcoin Jumps Above $97K as Traders Optimistic U.S.-China Trade Deal Possible.
Looking forward, Bitcoin’s path will likely be influenced by ongoing macroeconomic developments and the evolving dynamics of the US-China relationship. The question remains: Can Bitcoin sustain its momentum amidst shifting market priorities, or will it continue to play second fiddle to traditional equities? As the crypto community watches with bated breath, the coming months promise to be pivotal in determining Bitcoin’s standing in the global financial arena.
Source
This article is based on: Bitcoin price sells off after Trump’s US-China tariff deal — Here is why
Further Reading
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Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
