The cryptocurrency market is showing resilience as Bitcoin and Ether prices stabilize following positive economic developments. A cooling of inflation and the rollback of US-China tariffs have created a more favorable outlook for crypto, despite lingering economic concerns and uncertainty surrounding Federal Reserve interest rate policy.

The market responded favorably to the latest Consumer Price Index (CPI) report, which showed a 2.4% annual inflation rate. This offered some relief, especially considering the rising price concerns fueled by the ongoing global trade war. The US Dollar Index (DXY) also fell to a seven-week low, suggesting investor unease about growing US government debt. Typically, lower inflation and reduced trade tensions would boost confidence in stocks and strengthen the dollar.

Adding to the positive sentiment, the US and China have agreed to roll back tariffs to levels seen in February 2025. This eases tensions and removes retaliatory taxes that have been a drag on the global economy. According to the deal, both nations will roll tariffs back to levels seen in February 2025, easing tensions and removing retaliatory taxes. The stock market's performance suggests that investors were underwhelmed, even though the move significantly reduced the risk of economic fallout.

Bitcoin neared $109,000, while Ether posted a 3% gain, trading above $2,800. While it's too early to call it a trend, the crypto market appeared to slightly diverge from traditional assets. The S&P 500 index gave back part of its earlier gains, which had initially been driven by US President Donald Trump's announcement of a new trade agreement with China.

Analysts suggest that easing trade tensions could propel Bitcoin past the $100,000 mark, potentially benefiting altcoins like Ethereum and XRP as well. Lower tariffs are expected to reduce inflation pressures, increase institutional investment, and enhance retail participation in the crypto sector.

Former President Donald Trump has expressed intentions to lower the 145% tariff on Chinese goods, a move he believes has hindered trade. This potential tariff reduction is generating optimism in the crypto market. Lower tariffs will take pressure off inflation and reduce the chances of further rate hikes—things that usually hammer speculative assets like Bitcoin. Over the past month, Bitcoin has swung wildly, going below $80,000 and then back up to over $94,000. If trade tensions ease and inflation expectations cool, Bitcoin could hit $100,000—a price level seen as a major psychological and technical milestone.

High tariffs have historically inflated the cost of goods like electronics, clothing and industrial equipment. A rollback will bring down import costs, ease consumer price pressures and strengthen the dollar—leading to broader investor confidence. For the crypto sector, this means increased institutional investment, lower capital costs for mining operations, and more retail investor participation due to better economic outlook.

The broader macroeconomic backdrop is beginning to shift in response to the U.S.–China trade deal, and this recalibration could open new doors for crypto, particularly Bitcoin. In the weeks leading up to the agreement, both nations had pushed import tariffs above 100%, fueling concerns that rising prices would ripple across the global economy. These fears cast doubt on traditional inflation indicators.

If inflation continues to ease as expected, the Federal Reserve could find more room to cut interest rates, improving the liquidity environment for risk assets like Bitcoin. Headline inflation fell to 2.3% year-on-year, below expectations of 2.4%, while core CPI came in at 2.8%, in line with forecasts.

Overall, the cryptocurrency market is showing signs of strength, supported by cooling inflation and easing trade tensions. While economic uncertainties and Fed policy remain factors, the current environment appears conducive to further gains for Bitcoin and Ether.