Key Takeaways
- •President Trump described his meeting with President Xi as "12 out of 10."
- •He announced a reduction in tariffs on Chinese imports to 47% and stated that the issue of US access to rare earths has been resolved.
- •Following a decline after yesterday's muted rate cut decision, the question arises whether the crypto market will rally.
President Trump characterized his meeting with President Xi in Seoul as "a 12 out of 10," concluding a period of diplomatic engagement that traders favor and the crypto market urgently needs.
In a series of positive developments, the White House announced a reduction in tariffs on Chinese imports following President Trump’s significant meeting with President Xi in Seoul. Trump also indicated that substantial progress had been made on critical issues such as rare earth minerals.
At the current time, Chinese officials have not made any public statements regarding their export policies. For the interim, the narrative of a truce is being driven by Washington, as markets assess whether this meeting offers genuine relief after months of escalating trade tensions.
Tariff Truce: Real Relief, or Temporary Peace?
For the moment, hopes are cautiously optimistic. Trump stated that tariffs on Chinese goods will be reduced to 47%. Perhaps more significantly for the technology sector, China has agreed to postpone its planned restrictions on rare earth minerals.
Trump also announced that tariffs on Chinese products used in the manufacturing of the opioid fentanyl will be lowered from 20% to 10%, with Beijing committing to stricter domestic controls on the drug's export. Concurrently, agricultural markets received positive news, with China promising to immediately increase its imports of US soybeans.
This news is welcomed by risk assets that have faced challenges this week, particularly after the crypto market declined following a moderately hawkish Federal Reserve rate cut and significant Bitcoin ETF outflows totaling nearly $500 million yesterday.
A Moody October for the Crypto Market
This week has been challenging for the crypto market and crypto prices. Following last night's Federal Reserve rate cut, the second of this quarter, Fed Chair Jerome Powell's remarks dampened expectations for further cuts in December.
His statement: "A further reduction… is not a foregone conclusion, far from it," led to a decline in stocks and cryptocurrencies as the dollar strengthened and traders reduced their expectations for continued monetary easing.
Bitcoin experienced a 4% drop after Powell's statements, briefly falling below $109,000. Ethereum also dipped below $4,000, with substantial ETF outflows further impacting the market; over half a billion dollars exited the sector in a single day, primarily driven by Bitcoin withdrawals.
Many analysts view this as a typical market correction. However, those anticipating significant positive reactions from Powell's announcement were disappointed. Gold also retreated below $4,000 an ounce, reflecting a broader investor move away from riskier assets.
The Pivot: Is the Crypto Rally Just Getting Started?
Now, with the impact of Powell's statements still being processed, attention is shifting back to geopolitical developments. Could the tariff détente between Trump and Xi revitalize risk assets and crypto prices? This is a plausible scenario. The crypto market has historically shown a tendency to surge on de-escalation in US-China trade disputes, particularly when global trade and supply chains intersect with the blockchain economy.
However, the dominant narrative has shifted: monetary policy is no longer the sole influencing factor. This renewed period of geopolitical calm, however precarious, is the development traders are closely monitoring. While ETF outflows might temper immediate price increases, the prospect of reduced trade friction and a pause in economic posturing from Washington and Beijing could support a broader market rally, encompassing stocks, cryptocurrencies, and commodities.
Road Ahead: Hope and Hurdles
Naturally, there is no guarantee that this truce will endure. The specifics remain unclear and are subject to future announcements or developments. Rare earths, fentanyl, and agricultural products have all served as bargaining points in the past. Nevertheless, for today, risk-takers have a significant positive headline: a major escalation appears to be off the table, at least temporarily.
The crypto market, after a week of policy-driven volatility, may finally be recovering. Market indicators suggest a potential upturn. As always, the next significant move will be dictated by macroeconomic factors. Until then, any rally will be measured by diplomatic progress and evolving news cycles.