Bitcoin’s rollercoaster continues on US-China trade war fears – Is a reversal coming?

Bitcoin and other cryptocurrencies are facing renewed selling pressure on Tuesday as trade tensions between the US and China ramp up. These tensions are rattling market confidence and fueling risk-off trade. 

Bitcoin has fallen 3% lower to 98,000, while other major tokens such as ether and Solana are trading 4% and 5% lower, respectively. 

Washington imposed a 10% trade tariff on all Chinese goods, which came into effect today. The move was met with retaliation from China, as Beijing placed tariffs on some products imported from the US, including oil. China added it would investigate US tech giant Google for alleged antitrust violations. These latest developments have raised fears of a full-blown trade war between the world's two largest economies, hitting risk sentiment across the board. 

The markets are experiencing increased volatility, wiping out gains from yesterday's relief rally, which came following news of a one-month pause to trade tariffs on Mexico and Canada. While Bitcoin recovered 8% from 91k lows yesterday, the whipsawing price action saw $2.2 billion in liquidations in the crypto market. 

Escalating trade tensions have rattled investor confidence and appetite for riskier assets. The tech-heavy Nasdaq closed 1.2% lower yesterday, and futures are extending losses today. The risk-sensitive AUD/USD fell to its lowest level since the pandemic. Meanwhile, the spot BTC ETF recorded an outflow of $234.5 million yesterday. 

Is this just a typical Bitcoin shakedown? 

Despite the panic-induced sell-off in Bitcoin, the Coinbase Premium Gap (CGP) data points to aggressive buying activity. This signals strong buying activity as whales absorb the excess liquidity, which could point to a reversal. 

Furthermore, the recent selloff may not be out of the ordinary for Bitcoin’s bull runs. According to data from IntoTheBlock, Bitcoin's recent decline pushed 7% of holders into a loss. In previous Bitcoin bull cycles, BTC experienced multiple pullbacks, with around 10% of holders being forced into a loss without derailing the broader uptrend. Therefore, this week’s losses and volatility fit within levels that are considered normal in a historic bull run. 

Bitcoin technical analysis 

On the 4-hour chart BTC/USD trades in a descending channel, pointing to further downside in the near term. BTC/USD’s recovery faced rejection past the 100k at the upper band of the falling channel and around the 100 SMA and 61.8% Fib retracement level at 102.8k, falling to its current level at 98.5k, the 38.2% Fib retracement. The RSI is below, suggesting that momentum favours sellers. 

Should BTC fail to retake 100k and selling pressure builds, a break below 98.5 could see BTC/USD extend losses towards 94.2k, horizontal support, and a lower band of the falling channel. 

Meanwhile, should support at 98.5k hold, buyers could look to retake 100k and the 50 SMA at 101.8 to build on gains towards 102.8k. A rise above this could spur further gains towards 106k resistance of the 100 SMA, upper band of the falling channel, and 61.8% Fib level.  

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