US Treasury Secretary Scott Bessent announced on Thursday the suspension of certain trade restrictions aimed at curbing Chinese firms’ access to sensitive American technologies. This policy shift comes as part of a negotiated agreement where China consented to halt export controls on rare earth minerals crucial for electronics and defense industries, according to Reuters.
The development marks a de-escalation in US-China trade tensions that had recently shown signs of softening. Typically, such improved diplomatic relations act as a positive driver for digital asset prices, offering a degree of market optimism.
However, the cryptocurrency sector experienced notable declines Thursday, weighed down by mixed signals from the Federal Open Market Committee (FOMC). During its latest meeting, Federal Reserve Chair Jerome Powell highlighted divergent opinions among FOMC members regarding a potential interest rate cut in December. This uncertainty unsettled investors and contributed to widespread price losses across crypto markets.
In addition to interest rate ambiguity, the Federal Reserve indicated it would cease quantitative tightening (QT), a policy that reduces liquidity within the financial system. While the end of QT is generally favorable to assets including cryptocurrencies—due to the anticipation of more abundant liquidity—there is typically a lag before active quantitative easing (QE) begins. This gap can apply downward pressure on prices in the interim.
Historically, the conclusion of QT has corresponded with significant price drops. For instance, Bitcoin (BTC) declined by approximately 35% in 2019 after the Fed ended QT, raising concerns that current market cycles might mirror that downturn.
At Wednesday’s press conference, Powell acknowledged that inflation has eased relative to its mid-2022 peak but remains above the Fed’s 2% target. He emphasized the ongoing challenge of balancing maximum employment with price stability, underscoring the lack of consensus on monetary policy moves for December.
He stated, “There were strongly differing views about how to proceed in December. A further reduction in the policy rate at the December meeting is not a foregone conclusion—far from it. Policy is not on a preset course.”
The immediate market reaction was significant: within 24 hours following the FOMC event, over $1.1 billion worth of positions were liquidated across crypto derivatives platforms. Bitcoin’s price slipped below $107,000 and broke beneath its 200-day exponential moving average (EMA), a key technical support level, as reported by analytics firm Nansen.
Overall, despite the optimistic trade developments between the US and China, the crypto market has been unable to sustain gains amid the broader macroeconomic uncertainty and cautious monetary policy outlook. Investors remain watchful as liquidity conditions and policy directions evolve in the coming months.
