Why The Crypto Market is Pricing a U.S.-China Thaw This Monday

After two weeks of almost non-stop bearish control, the cryptocurrency market started off the week stronger. Since Sunday, digital assets have added $140 billion to their total market capitalization, giving investors a much-needed relief from selling pressure. Currently at a market value of $3.7 trillion, cryptocurrencies have erased all losses seen since last Thursday, providing investors with a cautiously optimistic outlook heading into the final stretch of October.

This sudden momentum helped currencies regain key levels of their price. Bitcoin now trades above $110k  once again, while Ethereum has regained the $4,000 margin. Even Dogecoin was able to climb back above $0.20, a key zone of support for the memecoin. 

The reason for this sudden optimism taking over the market has more to do with geopolitical developments than with any fundamental shift in crypto itself.

Trump Lists Demands on China

While still in a challenging tone, U.S. President Donald Trump declared yesterday his terms to reopen trade negotiations with China. As we previously noted, rare earths continue to be a strategic flashpoint in this standoff:

“I don’t want them to play the rare earth game with us,” Trump said on Air Force One yesterday. 

Fentanyl and soybeans are also major causes of contention in this ongoing trade war. Trump has repeatedly criticized China's alleged role in the global fentanyl supply global fentanyl supply chain. Meanwhile, China's decision to abandon soybean trade with the U.S. is also a big point of contention for the American President. 

Only a few days after the U.S. bailed out Argentina for its mounting debt crisis, China's decision to switch from American soybeans to Argentine may ignite a rift in Trump's farming base, which has in China its biggest trade partner. Perhaps for this reason, the American President added to his demands that China continue to buy American soy, despite the recurrent tariff threats by the U.S.

While these latest remarks are still very confrontational, markets are pricing them as if Trump is showing openness to negotiations with China. For this reason, investors have begun rotating back into risk assets, including cryptocurrencies, interpreting the shift as a potential thaw in U.S.-China relations.