The 90-day US-China truce that was recently declared has caused massive movements in the cryptocurrency markets. The Bitcoin rate also topped $105,000, and that was the highest since almost a month ago. This diplomatic breakthrough has set a ripple effect on the whole crypto ecosystem, whereby Bitcoin and other altcoins may reach their full potential.

Key Takeaways:

• Bitcoin has experienced a big upswing since the US-China truce was announced, but altcoins, such as Ethereum, are posting even greater discounts when measured in percentages.
• As the cooling inflation aids the arguments for prospective reduction in rates by the Fed, it offers positive moments for the growth of cryptocurrency all over the place.
• The prices of XRP could do with better risk sentiment and increased adoption of blockchain payment solutions by institutions.
• Investors still need to be careful, given positive momentum, since the 90-day truce comes with geopolitical uncertainties that may easily unwind market gains.

Trade Deal’s Impact on the Market Dynamics

The agreement that was declared on May 11-12 brought instant gratification to the world markets, which had suffered for months from mounting pressure. Both of the economic superpowers agreed to significantly reduce the existing tariffs. The United States lowered tariffs for $350 billion worth of Chinese imports from 145% to 30%. At the same time, China cut the duties on $120 billion worth of American goods from 125% to 10%.

The confidence of the investors in the risk assets has already improved due to this diplomatic reset. The S&P 500 rose by 3.26% after the news came out, which indicated that market optimism had been restored. The dollar index also fell slightly, which alleviated pressure on the emerging markets, as well as creating a more conducive environment for cryptocurrencies.

The Response of Bitcoin to the Enhanced Situation in the Market

Bitcoin is responding decisively to the news on the US-China truce. The prices of BTC rose to $105,740 and stabilized at $104,400, representing a 10% increase over the week. Such a movement signals that good vibes are coming back to crypto markets.

The Crypto Fear and Greed Index indicates this trend whereby it has increased from 59 the previous week to 70. The price recovery chart for Bitcoin since 5th April has taken the shape of a V, with the values bouncing high from the lowest levels of $75,000. Three weeks of inflows into spot bitcoin ETFs have further pushed it up by more than 5.8 billion since the beginning of the week to SoSoValue data.

Will Altcoins Outperform Bitcoin?

While Bitcoin gets our attention with its recent gains, altcoins are possibly an even better growth prospect. Ethereum has rallied almost 44% to trade at around $2,560, making it its best performance since December last year. Such a powerful rally implies the interest of investors in something other than Bitcoin.

The wider altcoin has awakened from its slumber. Charles Wayn of Galxe observed large gains on the weekends in a number of altcoin sectors. Such a diversified movement implies that market players can be moving some profits from Bitcoin into other cryptocurrencies that have a greater growth potential.

This better risk environment could provide significant support to the prices of XRP. As regulatory clarity emerges and cross-border payment solutions gain momentum, XRP may draw the attention of investors who look for alternatives to Bitcoin’s sustained growth.

Macroeconomic Factors Supporting Further Growth

The deflationary trend in the cooling inflation also further casts a vote for the cryptocurrencies. The headline inflation in April went down to 2.3% above the previous year. This reading fell below the expectations. That’s the third consecutive month of decline in headline and might give the Federal Reserve room to think of rate cuts.

While the “underlying inflation picture is good” and tariff-driven price effects are “short-lived,” as quoted by Fed Chair Jerome Powell. Thus, if inflation manages to slow its pace down further and Powell remains accommodative, Bitcoin and altcoins may benefit from the favorable change of the liquidity conditions.

Conclusion: US-China Truce

However, important caveats remain. The current US-China truce is valid for only 90 days, and both parties have onerous negotiations to make. Geopolitical events, especially with regard to Taiwan, can change the market mindset very fast and move it to the traditional safe haven assets.