Bitcoin BTC could soon hit record price highs, triggering accelerated gains in the wider altcoin market, as easing U.S.-China trade tensions may see markets react positively to a potential slowdown in the April CPI due this week.
The United States has reached a trade agreement with China after two days of high-level negotiations in Geneva, U.S. Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer announced on Sunday. Both countries are set to issue a joint statement on the Geneva trade talks later Monday.
The trade deal comes after weeks of a tit-for-tat trade war that saw both countries raise import tariffs above 100%, threatening to inject inflation into the global economy. As such, the positive March U.S. consumer price inflation data released last month was largely dismissed by investors and analysts as a lagging metric that didn’t accurately reflect the escalating trade tensions.
The bears, however, cannot make that argument anymore, thanks to the trade deal.
So, a continued softening of CPI could raise Fed rate cut bets, providing a bullish catalyst for a BTC rally to record highs above $110,000. On the other hand, a hotter-than-expected CPI could be dismissed as backwards-looking, reflecting the April tariffs and not accounting for the de-escalation in trade tensions.
The CPI due Tuesday is expected to show the cost of living eased to 2.3% year-on-year in April from March's 2.4%, according to RBC. The core CPI, which excludes food and energy, is expected to have stayed at 2.8% year-over-year in April, with continued moderation in rent inflation.
According to 10x Research, consensus is that the headline CPI likely held unchanged at 2.4% in April.
"If this expectation holds, the market may view the inflation report as positive. Barring any negative tariffs headline, this week's week's inflation data could provide a bullish catalyst," Markus Thielen, founder of 10x Research, told CoinDesk.
"CPI could be bullish, and may bring new all-time highs," Thielen added.
Bitcoin, the leading cryptocurrency by market value, changed hands at around $104,000, just 5.1% short of hitting new highs above $109,350, CoinDesk data show.
BTC has had a near V-shaped recovery from $75,000 since early April, with prices surging 10% last week due to continued inflows into the spot exchange-traded funds (ETFs).
BlackRock's spot bitcoin ETF (IBIT) has registered net inflows for 20 straight trading days, amassing over $5 billion in investor money, according to SoSoValue data. Last week, the Federal Reserve kept the benchmark borrowing cost unchanged in the range of 4.25% to 4.5%, while reiterating the data-dependent stance on potential rate cuts. Chairman Jerome Powell, however, offered dovish hints, saying "the underlying inflation picture is good," while calling the inflationary impact of tariffs short-lived.
Ether, the second-largest cryptocurrency by market value, rose 39% to $2,500 last week, the best performance since December 2020, according to TradingView. Other major altcoins such as XRP, DOGE, ADA and SOL surged 9.7%, 56%, 19% and 20%, respectively.
According to HTX Research, there are no signs of speculative frenzy yet, meaning the rally could continue.
"Implied volatility (IV) in bitcoin options remains stable in the 50%–55% range, far below the extreme levels of 80%+ typically seen at the peak of past bull markets. CME Bitcoin futures open interest currently stands at $14.8 billion, well below the $20 billion peak observed during the 2020 Trump election period, indicating that leverage is still manageable," HTX Research said.
"As long as yields do not climb back above 4.8% and ETF inflows remain steady, Bitcoin is likely to consolidate in the $105,000–$115,000 range while awaiting the next breakout trigger," HTX added.