Despite a seemingly positive turn in U.S.-China trade relations, cryptocurrency markets have delivered an unexpected blow to investors. While former President Donald Trump announced a breakthrough trade agreement with Chinese President Xi Jinping, both Bitcoin and Ethereum prices tumbled significantly, raising concerns about a potential shift into bearish territory.
Trump revealed on Truth Social that he and Xi had come to terms on several key issues, noting that some remaining topics of importance were nearing resolution. The agreement included a rollback of proposed 100% tariffs and a reduction in existing tariffs from 57% to 47%. This diplomatic progress was expected to act as a catalyst for broad market optimism, particularly in volatile sectors like cryptocurrencies. However, digital assets responded with steep declines.
Bitcoin’s value plunged to approximately $107,000 following the announcement, while Ethereum dropped sharply to around $3,700 on the same day. These losses came as a surprise, especially since investors had anticipated a positive market reaction. Earlier trade tensions had triggered a massive $19 billion liquidation across the crypto space on October 10, so a resolution was seen as a potential lifeline for digital assets.
Yet, the anticipated rebound never materialized. Analysts suggest that the market had already “priced in” the trade deal after U.S. Treasury Secretary Scott Bessent preemptively revealed the framework. As a result, the actual announcement did little to further stimulate investor enthusiasm, and instead, profit-taking began to dominate trading behavior.
Adding to the bearish sentiment was a speech from Federal Reserve Chair Jerome Powell, who cast doubt on the likelihood of a rate cut in December. Powell’s remarks at the FOMC press conference signaled an uncertain monetary path forward, leading traders to reassess risk exposure. Markets had been pricing in a 25 basis point rate cut, but Powell’s tone shifted expectations, dampening confidence in high-risk assets like cryptocurrencies.
On-chain analytics firm CryptoQuant provided further insight into the declining market momentum. Their research highlighted a significant drop in demand from U.S.-based investors for both Bitcoin and Ethereum. This trend was evident across spot markets and derivatives, hinting at a broader shift from accumulation to risk-off behavior. Metrics such as ETF inflows, futures basis, and spot exchange premiums collectively pointed toward cautious investor positioning.
Bitcoin ETFs, particularly those in the U.S., have turned net negative, with an average seven-day outflow of 281 BTC. This is one of the weakest trends observed since April. Ethereum is experiencing a similar situation, with ETF inflows stagnating since mid-August. These patterns reflect a growing sense of investor hesitation, likely driven by macroeconomic uncertainty and regulatory ambiguity.
Moreover, the Coinbase premium—a key indicator that compares the price of crypto assets on Coinbase with other global exchanges—has dropped to zero for both Bitcoin and Ethereum. Historically, a positive Coinbase premium has been associated with strong domestic buying interest. The current flat reading suggests that U.S. retail and institutional appetite for crypto assets has significantly cooled, at least for the time being.
The disappointing performance of Bitcoin and Ethereum despite positive geopolitical news raises critical questions about what truly drives crypto markets today. While macroeconomic developments such as trade deals and monetary policy still influence investor sentiment, internal crypto-specific factors appear to be playing a larger role than before.
For instance, liquidity dynamics within crypto exchanges, shifts in stablecoin supply, and whale wallet movements are increasingly shaping short-term price action. Additionally, lingering concerns about regulatory oversight, especially in the U.S., continue to weigh on investor confidence. The Securities and Exchange Commission (SEC) has intensified scrutiny over several crypto projects, which may be discouraging new capital inflows.
Another underappreciated factor is the cyclical behavior of the crypto market itself. After a strong rally during the earlier part of the year, many traders may simply be locking in profits, awaiting more favorable entry points. This pattern of accumulation followed by distribution is typical in speculative markets and can result in sharp corrections even without major news triggers.
Technical indicators also suggest that both Bitcoin and Ethereum have entered a consolidation phase. Key support levels are being tested, and unless strong demand re-emerges, there is a risk of further downside. Traders are closely watching the $100,000 level for Bitcoin and the $3,500 level for Ethereum as psychological and technical thresholds.
Looking ahead, the crypto market’s trajectory will likely depend on a combination of regulatory clarity, macroeconomic developments, and continued institutional adoption. Should the Federal Reserve adopt a more dovish tone in the coming months or if new spot ETF approvals are granted, investor sentiment could quickly shift back to bullish.
In conclusion, despite positive geopolitical signals from the U.S.-China trade front, the crypto market remains under pressure due to a convergence of macroeconomic caution, regulatory uncertainty, and internal market dynamics. Until these headwinds subside or new catalysts emerge, Bitcoin and Ethereum may continue to struggle for upward momentum.