Bitcoin price has recovered to the $104,000 level for the first time in three months last week. In the case of Bitcoin, the weekly increase was 8.46% as of 3 AM on May 12th, while Ethereum (ETH) recorded a sharp surge of 35.64%.
There were complex reasons behind the strong concurrent rise, including Ethereum, which had been particularly stagnant in price. First, substantial funds have been steadily flowing into traditional financial areas over the past few weeks. Moreover, looking at the U.S. administration's movements last week, there was an expectation that the tariff situation triggered in early April could be somewhat concluded. The UK has initially settled tariff negotiations with the U.S., and expectations of a settlement in the U.S.-China tariff negotiations scheduled for the weekend also served as a catalyst for the rise.
Federal Reserve Says "Now is the Time to Observe Hard Data" at May FOMC
The atmosphere was somewhat ambiguous until mid-week. At the Federal Reserve's May Federal Open Market Committee (FOMC), as the market expected, a decision to maintain interest rates was made.
Jerome Powell, Fed Chair, expressed a very cautious stance on monetary policy decisions during a press conference after the May FOMC. He clearly stated that he would not respond to interest rates before confirming 'hard data' because the policy uncertainty of the Trump administration is too large, while emphasizing the difficult situation where economic recession and inflation are simultaneously expected.
Hard data refers to data that fluctuates with actual economic activity. He noted that while soft data reflecting people's psychology and intentions shows significant inflation and economic recession, the Fed is focusing on substantive data.
Powell's remarks were interpreted as somewhat hawkish. The CME's FedWatch service saw the probability of an interest rate hold at the June FOMC rise from 68% to 75%.
Nevertheless, Bitcoin prices showed a gradual increase. Funds flowing into U.S. Bitcoin spot ETFs, which had experienced net outflows the day before the rate announcement, returned to net inflows the day after the rate hold.
Global liquidity is currently quite accommodative. Following the EU's seventh consecutive rate cut last month, the People's Bank of China lowered the reserve requirement ratio for commercial banks by 50 basis points and announced a 10 basis point cut in the loan prime rate (LPR).
What's Behind the U.S.-UK Tariff Negotiations That Caused Bitcoin to Surge?
On the 8th, the U.S. and UK completed their first country-specific tariff negotiations. They set universal and reciprocal tariffs at 10% for each other, with the UK allowing U.S. exports in ethanol, beef, grains, chemicals, machinery, and agricultural sectors.
The U.S. stated that British tariffs on the U.S. would decrease from 5.1% to 1.8%, and U.S. tariffs on the UK would decrease from 3.4% to 10%. They also emphasized generating $6 billion in tariff revenue that did not exist before.
In this agreement, the UK gained favorable conditions for exporting automobiles, steel, and aluminum. While the U.S. was planning to apply 25% tariffs on UK car imports, they agreed to reduce tariffs to 10% for up to 100,000 units. Steel and aluminum tariffs were completely exempted.
President Trump publicly claimed "now is the time to buy U.S. stocks" while announcing this news. He suggested investing in risky assets now as tariff negotiations that had previously complicated the U.S. economy would be successively settled, starting with the UK. After Trump's claim, Bitcoin and Nasdaq stocks rose sharply. Bitcoin's price, which had been around $96,000, immediately rose to the $103,000 range and has maintained that level through the weekend.
Scott Bessent Says "Significant Progress" in China Negotiations, Details to be Revealed on 12th?
As the mountain is deep, so is the valley. Since there was a clear reason for the rise, if tariff expectations fade, there is a high possibility that Bitcoin will give back last week's gains.
The most important schedule this week is the tariff negotiation announcement by Treasury Secretary Scott Bessent, who returned after concluding negotiations with China over the weekend. On the night of the 11th, he said, "After two days of very constructive negotiations, we made significant progress in the deal" and "detailed information will be announced on Monday (12th U.S. time)." The 'possibility of Bitcoin breaking through $105,000', which has become a regular discussion topic in the market, essentially depends on this.
The most important macroeconomic schedule is the April Consumer Price Index (CPI) to be announced on the night of the 13th. This CPI is drawing attention as the first price index directly affected by U.S. tariff policies.
On the night of the 15th, the April Producer Price Index (PPI) will be released in a similar context. It's worth paying attention to the U.S. retail sales indicators and Jerome Powell's public speech on the same day from the perspective of assessing economic contraction.
The Michigan Inflation Index will be released on the night of the 16th. We wish our readers successful investments this week as well.
