Bitcoin Climbs 2.5% to $86,000 as US Tariff Pause Eases Trade War Tensions

Bitcoin (BTC) has been navigating through the ongoing US trade war, which has entered its third week of April. The trade war has been a significant factor influencing traders' expectations and Bitcoin's price action. Tariffs have been the primary macroeconomic topic of the week, with risk assets bracing for potential surprise headlines. Despite the tariff pressures, the weakness of the US dollar could be beneficial for Bitcoin and other risky assets. Additionally, the global M2 money supply is at an all-time high and continues to rise, raising questions about whether Bitcoin will follow historical patterns and replicate its past performance.

Bitcoin's price action has been attempting to overcome a long-term resistance trend line without success. Traders are closely monitoring the situation, with some predicting that Bitcoin might push to $88,000 but cautioning that it could be a fakeout, leading to a dip to $81,000. Others are eyeing the trend line as a breakout, with Bitcoin having daily closed above the downtrend, indicating that a breakout confirmation is underway. However, Bitcoin has previously closed above the downtrend but failed its retest, so the retest needs to be successful for the breakout to be confirmed.

The trade war continues to dominate the market, with China being a particular focus. Risk assets and crypto face flash volatility should more surprises involving trade tariffs surface. The weekend saw snap relief as the US President announced a pause on tariffs for key tech products, leading to Bitcoin climbing to eleven-day highs above $86,000. However, subsequent indications that the measures would be temporary put renewed pressure on stocks’ futures, while BTC/USD retreated to circle $84,000. The uncertainty around tariffs has become a binary and unpredictable event for the stock market, with signs of tensions fueling further downside, while an easing of tensions sends stocks sharply in the other direction.

Bitcoin ETFs lost almost $800 million in a week, but network economist Timothy Peterson noted that even a nine-figure drawdown such as this makes hardly any difference to the overall investment pool that the ETFs have created in little more than a year. Among major investors seeking to “buy the dip” is business intelligence firm Strategy, whose co-founder hinted that it was upping its BTC exposure this weekend. However, whether Bitcoin will emerge as an attractive proposition for the institutional investor cohort while trade war uncertainty continues is dubious. A survey showed that respondents overwhelmingly favored gold as a volatility hedge, with 58% choosing it, compared to just 9% for 30-year Treasury Bonds and 3% for Bitcoin.

The US dollar may yet provide some light at the end of the tunnel for wary risk-asset traders this week. The trade war has taken its toll on the greenback, and when measured against major trading partner currencies, its weakness is plain to see. The US dollar index (DXY) fell to three-year lows last week and, at the time of writing, is challenging those lows once more. Bitcoin’s relationship with dollar strength tends to show that gains occur after major DXY losses — albeit with a delay of several months. Popular analytics account Bitcoindata21 is eyeing a repeat of events from 2017, resulting in BTC/USD all-time highs at the end of the year. Another chart showed the relationship between DXY, Bitcoin, and the S&P 500, providing ideal conditions for a long-term bottom in the latter.

On longer timeframes, an equally promising trend is playing out for Bitcoin bulls. The global M2 money supply, with which Bitcoin price action is positively correlated, is seeking to break out beyond all-time highs. This is a fantastic sign for what it signals will be coming into risk assets in approximately 108 days. Before that, however, there may be a final opportunity to “buy the dip.” Earlier this month, the analyst predicted a “big M2 influx” incoming, with a corresponding BTC price rebound beginning in May.