Despite a recently brokered trade deal between the United States and China, the cryptocurrency market sentiment remains entrenched in "Fear". This cautious outlook persists even after President Donald Trump's announcement of tariff reductions and a preliminary agreement with Chinese President Xi Jinping.
The Crypto Fear & Greed Index, a widely recognized gauge of overall market sentiment, continues to reflect this anxiety. On Sunday, the index posted a "Fear" score of 37, a slight increase of 4 points from Saturday's score of 33. This indicates that while there's been a marginal improvement in sentiment, the market is still far from exhibiting "Greed" or even a neutral stance.
President Trump hailed the agreement as a "massive victory" that would safeguard American economic strength and national security. The deal includes reduced U.S. tariffs on Chinese goods, decreasing them from 57% to 47%, and a reduction in tariffs on fentanyl-related products to 10%. China has also pledged to purchase U.S. soybeans and address fentanyl production. Moreover, export restrictions on semiconductors, notably Nvidia chips, are expected to ease.
Historically, announcements regarding U.S.-China trade relations have triggered significant movements in the crypto market. For instance, Trump's announcement of a 90-day tariff suspension in April led to a surge in the Fear & Greed Index. Conversely, his threat of imposing 100% tariffs on China was blamed for a recent crypto market crash that resulted in $19 billion in liquidations.
Following the announcement of the trade deal, Bitcoin's price experienced a sharp drop, declining by 4% to $108,398. The broader crypto market mirrored this downturn, with an overall decrease of over 4%. However, Bitcoin subsequently rebounded above $111,300 after Trump indicated that tariffs on China would be reduced.
Analysts suggest several factors contributing to the current market sentiment. Min Jung, a Presto Research Associate, pointed out that the initial decline in Bitcoin's price after the Trump-Xi meeting was due to the absence of immediate trade announcements, suggesting that the market had already factored in most expected developments. Derek Lim, research lead at Caladan, emphasized the need for confirmation from China regarding the details of the agreement, particularly concerning rare earth issues, highlighting the uncertainty that persists.
Furthermore, the Federal Reserve's cautious sentiment regarding future interest rate cuts adds another layer of complexity. Despite a widely anticipated 25 basis points rate cut, Federal Reserve Chair Jerome Powell expressed uncertainty about another rate cut in December, contributing to the overall market anxiety.
While the trade deal has eased some global trade tensions, its impact on the crypto market remains uncertain. The market's initial reaction suggests that investors are waiting for more concrete details and confirmation from both sides before fully embracing a risk-on approach. The "Fear" sentiment, as indicated by the Crypto Fear & Greed Index, reflects this wait-and-see attitude, with the market grappling with a mix of cautious optimism and lingering doubts.
