Bitcoin's Strategic Rebound Amid Easing US-China Trade Tensions

The U.S.-China trade war has long been a barometer for global geopolitical risk, with its ebb and flow directly influencing market sentiment and asset performance. In late 2025, a brief but significant de-escalation of tensions between the two economic superpowers provided a rare window of stability, offering a case study in how geopolitical risk mitigation can catalyze digital asset markets. For Bitcoin, this period-spanning May to August 2025-marked a strategic rebound, driven by temporary tariff reductions and renewed diplomatic engagement.

The May 2025 Truce: A Catalyst for Bitcoin's Surge

On May 12, 2025, the U.S. and China announced a 90-day tariff truce, reducing U.S. tariffs on Chinese goods from 145% to 30% and Chinese tariffs on U.S. goods from 125% to 10%, according to a BeInCrypto report. This agreement, framed as a pause to facilitate negotiations on critical issues like rare earth exports and technology transfers, immediately stabilized global markets. Bitcoin responded with a sharp upward move, surging past $105,000 for the first time in months, the BeInCrypto report noted. BeInCrypto also reported the cryptocurrency's price reached $105,705 within days, fueled by optimism that reduced trade friction would ease supply chain bottlenecks and lower inflationary pressures.

The market's bullish reaction was further amplified by on-chain data. The Bitcoin futures Long/Short Ratio exceeded 1.07, indicating a surge in speculative long positions, while demand for call options in the derivatives market spiked, signaling investor confidence in sustained price momentum. This alignment of macroeconomic and on-chain signals underscored Bitcoin's role as a barometer for global risk appetite.

Geopolitical Risk Mitigation and Sentiment Shifts

The truce's impact extended beyond price action. The Bitcoin Fear and Greed Index, a composite metric tracking volatility, social media sentiment, and trading volume, reflected a dramatic shift in market psychology. By late July 2025, the index hit a reading of 74, firmly in the "Greed" zone, according to a CoinDesk article. This contrasted sharply with earlier months, when the index had lingered in the "Fear" category, as CoinMetro noted.

Analysts attributed this shift to the truce's role in reducing uncertainty. As stated by CoinMetro, the easing of trade tensions "provided a stable environment for capital flows into risk-on assets like Bitcoin." This was evident in broader market trends: the S&P 500 and crude oil prices also rose during the same period, as Asia Times reported. However, Bitcoin's performance diverged from traditional assets in one key way-it remained sensitive to the unresolved nature of U.S.-China negotiations. While the truce offered short-term relief, lingering disputes over rare earth exports and semiconductor controls kept volatility alive, as CNBC reported.

Re-Escalation and the Fragility of Gains

The temporary nature of the truce became apparent in October 2025, when U.S. President Donald Trump announced a 100% tariff on Chinese goods, effective November 1. This move, coupled with China's rare earth export restrictions, triggered a sharp sell-off in cryptocurrencies. Bitcoin fell below $119,000, with Ethereum and Solana also declining, as reported by CoinDesk. The renewed risk-off environment saw investors flee to traditional safe havens like gold, which hit an all-time high of $3,167.57 per ounce in April 2025, according to CNBC.

This volatility highlights a critical nuance: while geopolitical risk mitigation can drive Bitcoin's short-term performance, durable gains require lasting trade agreements. As noted by CNBC, the August 2025 extension of the tariff truce (pushing the deadline to mid-November) provided only "limited relief," as unresolved issues like rare earth controls continued to weigh on sentiment.

Implications for Investors

For investors, the May–August 2025 period underscores Bitcoin's dual role as both a hedge against geopolitical uncertainty and a barometer for trade-related optimism. During the truce, Bitcoin's price action mirrored broader market confidence, rising in tandem with reduced trade tensions. However, the October sell-off revealed the fragility of these gains in the absence of a comprehensive resolution.

Looking ahead, the Trump-Xi summit scheduled for the APEC meeting in South Korea remains a pivotal event. If the two nations can reach a durable agreement on rare earth exports, semiconductor access, and technology transfers, Bitcoin may see renewed upward momentum. Conversely, further escalations-such as U.S. export controls on critical software-could reignite risk-off sentiment and drive capital into traditional safe havens, a dynamic first highlighted by BeInCrypto.

Conclusion

Bitcoin's strategic rebound in late 2025 demonstrates the profound impact of geopolitical risk mitigation on digital asset markets. The May–August truce provided a temporary but significant boost, with Bitcoin surging past $105,000 as trade tensions eased. However, the re-escalation in October serves as a reminder that Bitcoin's performance remains deeply intertwined with the unresolved dynamics of U.S.-China relations. For investors, the lesson is clear: while geopolitical de-escalation can unlock short-term gains, long-term stability requires a durable resolution to the underlying tensions.