In a nutshell
- President Trump's trade deal announcement with the UK sent Bitcoin soaring to its highest point since February, brushing against the $100,000 mark.
- Following the Federal Reserve's rate hold at 4.25%-4.50%, crypto markets, stocks, and even treasuries witnessed a "Trump put," as investors perceived the administration as a backstop for risk.
- The U.S.-UK deal comes as a diplomatic breakthrough after months of economic tensions under Trump's "Liberation Day" agenda; Britain has been facing tariffs on several sectors.
- The rally may have priced in a bullish scenario, as per analysts, with the upside potential becoming more limited due to external factors like uncertainty in trade talks with China and rising inflation.
Exploring SCENE
Bitcoin breaches $100,000 after U.S.-UK trade deal news
Cryptocurrency Surges to Multi-Month High; Market Anticipates Bitcoin Approaching $100,000 Valuation
Bitcoin scorched its way to $101,000 on May 5th, hitting its highest peak since February, in a spectacular response to President Trump's promised trade agreement with the UK. The crypto colossus came within spitting distance of its all-time high, established in March, and shows no signs of stopping at $100,000. Bitcoin's explosive performance saw a 2.6% growth after briefly hitting $94,000 on CoinGecko data.
Trump made his announcement on Truth Social late Wednesday evening, hinting at a significant international trade agreement. Citing sources from the New York Times, the deal appears to involve Britain, setting the stage for a potential landmark achievement following months of economic tensions driven by tariffs.
The country has been under U.S. tariffs of 10% for general goods and 25% for steel, aluminum, and automobiles. British officials have been eager to alleviate the pressure on these sectors, and the anticipated deal aims to tackle their concerns. In return, the UK may consider reducing its digital services tax and scaling back tariffs on American agricultural products.
Markets on cloud nine after Fed's cautiously optimistic update
The crypto market's exuberance didn't stop at just Bitcoin; the entire digital assets spectrum enjoyed a surge, thanks in part to the Fed's restrained policy update on the same day. Equities, including the S&P 500 and Dow, also experienced a modest increase of just under 1%.
Despite acknowledging "heightened uncertainty" and fragile consumption data, Fed Chair Jerome Powell maintained that the economy remains in a "solid position."
Trump's secret weapon: A crypto put?
Aurelie Barthere, a principal analyst at Nansen, commented that recent statements by Trump and Treasury Secretary Scott Bessent had lowered the market's fear of escalating tariffs. Barthere explained that traders have started treating Trump's administration as a "Trump put" – a phrase used in options markets to describe a floor price that offers protection against a significant price drop. This "Trump put" extends to equities, Treasuries, and cryptocurrencies.
However, Barthere cautioned that the rally needs validation, particularly considering ongoing trade negotiation with China. "We've priced in scenario one," she stated, referring to Nansen's internal forecast, which attributes a 55% probability to Bitcoin gradually reaching new all-time highs. But she noted that the bullish momentum is now "less asymmetric," meaning there's less room for upside surprise.
Marcin Kazmierczak, COO and co-founder of modular oracle RedStone, shed light on Bitcoin's relationship with traditional markets over the past year, elucidating how it exhibits fluctuating correlation with the S&P 500, ranging between -0.2 and 0.4. This declares Bitcoin a "diversifier," not a "safe haven," because it "doesn't consistently move opposite to stocks during downturns."
Bullish sentiments tempered by fundamental concerns
In a recent outlook shared with Decrypt, Nansen issued a warning that market sentiment might be "getting ahead of fundamentals." The report raised concerns over the sharp drop in the equity risk premium, now below 3%, as evidence that traders are "underpricing downside risks." Despite fragile consumption data, stalled trade talks with China, and persistent core services inflation, the bullish momentum remains undeterred.
Daily Debrief Newsletter
[1] Bitcoin price spikes after Trump announces trade agreement with UK
[2] What is a Trump Put, and Why are Crypto Traders Celebrating One?
[3] BREAKING: The US and UK reach a trade agreement
[4] U.S. stocks rally after Fed keeps rates steady
[5] Bitcoin (BTCUSD) Surges Above $100,000 After U.S.-UK Trade Deal Announcement
Edited by Sebastian Sinclair
- The Bitcoin price soared to $101,000, brushing against the $100,000 mark, in response to President Trump's announced trade agreement with the UK, indicating a brief rally on CoinGecko data.
- The U.S.-UK trade deal, which comes after months of economic tensions due to tariffs, seems to have served as a diplomatic breakthrough and a potential landmark achievement.
- In addition to Bitcoin, the entire digital assets spectrum, equities such as the S&P 500 and Dow, and even treasuries, witnessed a surge on the day of the Federal Reserve's restrained policy update.
- Crypto analyst Aurelie Barthere believes that recent statements by Trump and Treasury Secretary Scott Bessent have lowered the market's fear of escalating tariffs, leading traders to perceive the administration as a "Trump put" - offering protection against a significant price drop.
- However, bullish momentum, fueled by the anticipated trade agreement, may need validation, especially when considering ongoing trade negotiations with China, according to analysts like Barthere.
- Marcin Kazmierczak, COO and co-founder of RedStone, explains that Bitcoin exhibits fluctuating correlation with the S&P 500 over the past year, declaring it a "diversifier," not a "safe haven."
- Nansen's recent outlook warns that market sentiment might be "getting ahead of fundamentals," as traders potentially underprice downside risks, such as stalled trade talks with China, persistent core services inflation, and fragile consumption data.
