Author: Bright, Foresight News
On the morning of May 7, the cryptocurrency market rebounded from the consecutive declines after the May Day holiday, with the secondary market following BTC's rise. BTC rose from its previous low of $93,390 to $97,732, an increase of over 4.4%, recovering the losses of the past five days. At the time of writing, Bitcoin was trading at $96,866.
ETH recovered from $1,751.45 to $1,850, a 5.6% increase. SOL rose from $141.41, reaching a high of $149.54, a 5.74% increase.
The total cryptocurrency market value rebounded by over 2%, once again breaking through $3 trillion. Bitcoin's market dominance exceeded 65%, reaching a new high since January 2021. The Fear and Greed Index rose to 67, representing greed. Meanwhile, US crypto stocks also rose after hours, with Coinbase rising to $200, up 1.58%; MicroStrategy closed at $393.89, up over 2.15%.
According to Coinglass, over 137,600 liquidations occurred in the past 24 hours, totaling $311 million, with both long and short positions liquidated. In the past hour, $40.972 million was liquidated, with $38.002 million in short positions. The largest single liquidation on CEX was ETH-USDT on Binance, valued at $8.053 million.
What catalyzed the sharp rise in crypto and global risk assets in the morning?
On the morning of May 7, the Chinese Ministry of Foreign Affairs announced that Vice Premier He Lifeng will visit Switzerland from May 9-12, during which he will hold talks with the US side. This news significantly boosted risk appetite, with the RMB briefly rising over 100 points to break 7.20. US stock index futures surged, with Nasdaq futures rising over 1%. Spot gold fell over 1.9%, hitting a daily low of $3,370 per ounce.
Tariff Pressure Becomes Unsustainable
The subtle shift in China-US relations became the key turning point for market sentiment. Following the Trump administration's 104% tariffs on Chinese goods in April, which caused significant volatility in global risk assets, the Chinese Ministry of Foreign Affairs announced on May 7 that Vice Premier He Lifeng will visit Switzerland from May 9-12 and hold formal talks with US Treasury Secretary Becerra and Trade Representative Tai. This is the first face-to-face consultation on economic and trade issues between high-level officials since the 2024 G20 Summit, interpreted by the market as a clear signal of "pausing tariff escalation".
Historical data shows that in January 2024, during the China-US trade negotiation window, Bitcoin rose 22% in a single month due to improved cross-border capital flow expectations. In the 48 hours before this news, the crypto market had already anticipated the tariff suppression - on May 6, when US stocks plummeted, BTC only dropped 0.3%, significantly lower than Nasdaq's 0.87% decline, demonstrating its "desensitization" to geopolitical risks.
The latest data from the US Department of Commerce on May 6 shows that the US trade deficit surged to $123.4 billion in March, the highest since 1992, primarily due to companies stockpiling imported goods before tariffs take effect. This data forces the Trump administration to re-evaluate the actual effectiveness of its "tariff pressure" strategy.
According to a White House internal memo cited by Bloomberg, maintaining current tariff rates would reduce US retailers' annual profits by 15% and potentially push inflation back to 5.5%. "The marginal improvement in tariff policy is essentially a process of global capital re-pricing 'de-dollarization' assets," Bitwise CIO Matt Hougan noted in a morning conference call, stating that when US dollar credit is damaged by trade conflicts, BTC's "digital neutrality" becomes the optimal solution for cross-border value storage.
Institutional "Dollar-Cost Averaging" and Policy Support
While the market is immersed in short-term positive news about China-US relations, institutions seem to have long been reshaping the crypto valuation system through "BTC dollar-cost averaging". According to SoSoValue data, on May 6, BTC spot ETF total net inflow was $425 million, with total net asset value at $108.685 billion, and ETF net asset ratio (market value to total BTC market cap) reaching 5.91%, with cumulative net inflow reaching $40.662 billion.
According to Lookonchain, on May 6, BlackRock's BTC spot ETF (iShares Bitcoin Trust ETF) purchased 5,613 BTC again, valued at approximately $529.5 million, currently holding 620,252 BTC worth about $5.851 billion. Since April 21, BlackRock has accumulated 47,064 BTC, valued at approximately $4.44 billion. Moreover, in the past week, BlackRock's ETF has been directing $500 million daily, sparking market speculation about its "high-level accumulation".
On the policy front, positive news came from state-level cryptocurrency strategic reserves. New Hampshire Governor Ayotte signed HB302, the first state law in the US to use cryptocurrency as a strategic reserve. This means the New Hampshire Treasurer can invest up to 5% of state government funds in metals and cryptocurrencies with a market cap of at least $50 billion. With New Hampshire's total budget of $15.4 billion, 5% is about $770 million; with the general fund of $5.6 billion, 5% is about $280 million. Thus, the potential crypto investment ranges from $280 million to $770 million, setting a precedent for subsequent state legislation on crypto strategic reserves.
Fed Meeting Still Deeply Buried "Fuse"
Despite short-term sentiment recovery, the Fed's May rate decision still hangs like the Sword of Damocles. CME rate futures show that the current market sees only a 3.1% probability of a 25 basis point rate cut in May. The probability of a 25 basis point cut in June is also only 65% (down 10 percentage points from the April peak), with the 10-year US Treasury yield accelerating to 3.75%, reflecting investor concerns about "policy lag" - April's non-farm employment added 177,000 jobs, and the core PCE price index rose 4.7% year-on-year, indicating the US economy's resilience and potentially delaying the rate cut.
The crypto market faces a delicate balance. If the Fed maintains rates, high funding costs could suppress risk asset valuations (historical data shows that for each percentage point rates are maintained, Bitcoin's implied volatility will increase by 12%); if dovish signals are released, BTC's logic as an "anti-inflation asset" will be quickly reinforced.
The current market's point of contention is the Fed's "rate cut pace". In the Fed's latest "Economic Projections Summary", 12 officials support only a 50 basis point cut in 2025, while 7 support a 100 basis point cut, forming a rare "hawk-dove confrontation". As the traditional financial system falls into "stagflation spiral" (stubborn inflation + slowing growth), Bitcoin's network effect (daily active addresses reaching 12 million) and market cap (over $1.9 trillion) make it a "necessity" for institutions to hedge policy risks. Notably, the Fed's overnight reverse repo scale has decreased for three consecutive days to $1.2 trillion, indicating that the banking system's liquidity surplus issue is easing, which may indirectly affect the scale of crypto leverage funds.
However, although BTC has rebounded above the $97,000 mark, its dominance breaking through 65% indicates a strong risk-averse sentiment. Combined with BTC's recent extremely low volatility, there may be significant price fluctuations after the Federal Reserve meeting. Powell's stance of being "hawkish" or "dovish" this time will be crucial.
