The meme coin website creatorfinancial markets witnessed a curious divergence on May 12 when the U.S. and China announced an unexpected 90-day tariff reduction. While the S&P 500 futures immediately jumped 2.8% and Brent crude oil prices surged 4.2%, the cryptocurrency market displayed a completely different pattern.
Within the first hour of the announcement, Bitcoin slipped below $98,000 while Ethereum gave up its psychological $5,000 support level.
Market analysts have identified three primary factors that could explain this unusual price action:
1. Profit-Taking After Speculative Positioning
The crypto market had already priced in significant geopolitical risk premium during the weeks leading up to the trade negotiations. Bitcoin's 28% rally in April and Ethereum's 40% weekly surge suggested traders were positioned for continued trade tensions.
When the unexpectedly positive outcome materialized, it triggered a classic "buy the rumor, sell the news" reaction among crypto traders.
2. Capital Rotation to Traditional Markets
The dramatic moves in equities and commodities created immediate opportunities that drew capital away from digital assets. Institutional investors particularly showed greater appetite for oversold Chinese tech stocks rather than crypto derivatives in the immediate aftermath.
This temporary capital rotation was further evidenced by the 15% spike in trading volumes for Hong Kong-listed tech shares.
3. Changing Perceptions of Crypto as Hedge Asset
The parallel decline in both Bitcoin and gold (down 3.2%) suggests markets are beginning to price cryptocurrencies more similarly to traditional haven assets. This represents an important evolution in how institutional investors view digital assets within portfolio allocation strategies.
Technical analysts note that Bitcoin's weekly chart shows strong support around $92,000, with the 20-week moving average currently at $89,500. The formation of a bull flag pattern suggests the current pullback may represent a healthy consolidation before the next leg higher.
By the European trading session, both Bitcoin and Ethereum had recovered most losses as traders digested the broader implications of reduced trade tensions for global liquidity conditions.