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Bitcoin hovered around $118,000 on Tuesday as traders absorbed signals from diplomatic talks between the United States and China. While the discussions were seen as constructive, no formal agreement was reached to extend the 90-day pause on tariffs. Now, all eyes are turning toward the Federal Reserve’s policy meeting on Wednesday, which could shape Bitcoin’s next move.
US-China Trade Talks End Without Firm Resolution
Diplomats from Washington and Beijing met in Stockholm to discuss ongoing trade tensions. China’s top trade negotiator, Li Chenggang, confirmed that both sides were working toward extending the current tariff pause beyond the August 12 deadline. However, U.S. Treasury Secretary Scott Bessent clarified that while such an extension was discussed, no final decision had been made.
Currently, U.S. tariffs stand at 30% on Chinese imports, while China imposes 10% on American goods. Though not officially part of the trade negotiations, former President Donald Trump indicated he might visit China following an invitation from President Xi Jinping. This diplomatic back-and-forth, while encouraging, has yet to bring certainty to global markets.
Bitcoin Slightly Slips Amid Global Policy Uncertainty
In the wake of these talks, Bitcoin saw a mild dip, sliding from a recent high of $119,258 to $118,000. The price action reflects broader market indecision, with risk assets generally treading water as investors await clearer guidance on U.S. monetary policy.
Daniel Liu, CEO of Republic Technologies, emphasized the importance of this week’s macroeconomic developments. “A string of favorable macro headlines could catalyze a sharp move for crypto,” Liu told Decrypt.
Bitcoin, like many other digital assets, often acts as a high-beta asset—amplifying the moves of traditional equities in response to macroeconomic signals. As such, any news from the Fed or changes in the U.S.-China relationship could significantly impact its trajectory.
Fed Decision Looms as Markets Eye Rate Cuts
Attention is now centered on the Federal Reserve’s policy meeting scheduled for Wednesday. While the chances of a rate cut in July are slim—standing at just 3.1% according to CME’s FedWatch tool—traders see a 65.4% probability of a rate reduction in September.
Lower interest rates tend to benefit riskier assets like Bitcoin by making borrowing cheaper and reducing yields on traditional instruments such as government bonds. If the Fed hints at a more dovish stance, Bitcoin and the broader crypto market could experience renewed bullish momentum.
Tariffs and Inflation: A Balancing Act for the Fed
Analysts warn that sweeping tariffs proposed by the U.S. could complicate the Fed’s battle with inflation. Import taxes typically increase consumer prices, thereby fueling inflation—a key metric the Fed has been striving to control.
If trade tensions escalate without resolution, the central bank may face conflicting pressures: to ease interest rates to support growth, while also managing inflation that tariffs might exacerbate. This uncertainty adds another layer of volatility to an already fragile crypto market.
Liquidity Rises but Crypto Stalls
Adding to the complexity is the rising U.S. money supply. According to The Kobeissi Letter, the M2 money supply rose 4.5% year-over-year in June to a record $22.02 trillion. In theory, increased liquidity should support higher asset prices, including cryptocurrencies.
Yet, despite this influx of capital, Bitcoin and other digital assets have not seen significant upside. This disconnect suggests that investors remain cautious, likely awaiting clearer signals from central banks and geopolitical developments before allocating more to high-risk markets like crypto.
Final Thoughts: Bitcoin Caught Between Macro Forces
Bitcoin’s current stagnation near $118,000 reflects a broader pause across risk assets. On one hand, diplomatic gestures between the U.S. and China provide hope for reduced trade tensions. On the other, uncertainty around tariff extensions and upcoming Fed decisions keeps markets in wait-and-see mode.
With the Federal Reserve’s reveal just hours away, traders and investors are bracing for potential volatility. Whether Bitcoin breaks out of its current range will likely depend on the tone and direction of Wednesday’s Fed policy statement. Until then, the crypto market continues to watch the macro landscape closely.
