Bitcoin, crypto market holds steady following US-China trade agreement and lower inflation

Bitcoin (BTC) and the cryptocurrency market remained steady on Wednesday as the US Consumer Price Index (CPI) data for May rose to 2.4%, below market expectations of 2.5%. The development follows President Donald Trump's announcement of a trade agreement between the US and China, stating that he will work closely with President Xi Jinping to foster positive trade relations.

Crypto market posts mixed performance following May CPI and US-China deal

The US Bureau of Labor Statistics (BLS) released the CPI inflation data for May, with both headline and core CPI rising 0.1% on a monthly basis, below estimates of 0.2% and 0.3%, respectively.

Annual headline CPI rose to 2.4% from 2.3% in the previous month but failed to meet expectations of 2.5%. The core CPI also rose to 2.8% in May, below expectations of 2.9%, although it matched the increase in April. The rise in inflation could influence the Fed's decision next week, with traders already pricing in a rate cut by September. 

Policymakers have so far maintained a wait-and-see approach concerning their economic outlook. 

"Chicago Fed President Austan Goolsbee noted that they must wait and see if tariffs have a big or a small impact on inflation before taking a policy step," FXStreet reported earlier.

However, President Donald Trump has again called for the Fed to lower rates by 100 basis points, stating that the decision is highly important.

"CPI just out. Great numbers! Fed should lower one full point. Would pay much less interest on debt coming due. So important," Trump said in a Truth Social post on Wednesday.

President Trump also revealed the US and China reached a trade agreement following a meeting between delegates of both countries in London on Monday and Tuesday.

Trump shared that the "deal with China is done, subject to final approval with President Xi and me." He also stated that he will work closely with China's President Xi Jinping to "open up China to America trade."

As part of the deal, the US will maintain a 55% tariff on Chinese goods, while China will continue its 10% levy on US trade. The 55% tariff comprises a 30% levy set earlier this year, along with pre-existing duties of 25%.

The crypto market saw narrow gains following the developments, with Bitcoin briefly rising above $110,000 before dropping to $108,700 at the time of publication. Although Bitcoin continues to trade near its all-time high, market sentiment is notably cautious.

Bitcoin's funding rates indicate that traders are maintaining a defensive stance, with the average funding rate hovering at 1.3% annualized over the past week, according to a K33 Research report on Tuesday. This range has been observed near local bottoms in the past two and a half years.

"Historically, BTC does not top in environments with negative funding; such conditions tend to precede rallies rather than mark peaks. This suggests that current risk aversion may set the stage for further upside," wrote K33's Head of Research Vetle Lunde.

Top altcoins Ethereum (ETH), Solana (SOL) and Dogecoin (DOGE) have maintained positive momentum since Tuesday, with gains of 2.5%, 3%, and 2%, respectively, over the past 24 hours.

Among token categories, the decentralized finance (DeFi), artificial intelligence (AI) and meme coin sectors are up by 5.2%, 5% and 2%, respectively.