Bitcoin recovers, but is this a dead cat bounce, or are there reasons to be optimistic?

Bitcoin is rising towards 80k as it extends its recovery from yesterday's 5-month low of 74.4k. However, amid ongoing uncertainty surrounding Trump’s trade tariffs, the mood remains cautious. 

Yesterday was a chaotic trading day across risk assets, with wild swings amid mixed messages from the White House. However, today, the mood has stabilised, with hopes that Trump may be open to negotiations.  

A weaker yuan is good news for BTC

However, Trump has doubled down on China, threatening a further 50% trade tariff should Beijing retaliate, while China has vowed to fight to the end. The PBoC has allowed the yuan to weaken past the keenly watched 7.20 per dollar level amid the escalating trade war. This is the first time since Trump came to power that China has weakened its currency below this level, which investors see as a red line for intentions toward a managed currency. 

Intentionally setting the daily mid-point beyond the 7.2 level indicates a shift to managed depreciation, which could help keep China’s exports more competitive. This could potentially offset Trump’s tariff on Chinese goods. 

The slight weakening of the yuan has helped improve risk sentiment and could favour Bitcoin bulls, driving Chinese capital into Bitcoin in a similar way that it did in 2015. 

On August 11, 2015, the Chinese central bank devalued the yuan by 1.9% in its most significant single-day depreciation in over 20 years. Bitcoin initially fell 20% with US stocks before quickly recovering and surging 60% in the four months following. Ben Zhou, CEO and founder of the Bybit crypto exchange, has said that a depreciation in the yuan often bodes well for Bitcoin. However, it is worth noting that Beijing has become anti-crypto in recent years, which could make it more challenging to diversify into crypto than previously. 

Is Trump ready to negotiate? 

News that US Secretary Scott Bessant is leading a team of negotiators in Japan is raising optimism that the Trump administration could be open to negotiation. The Nikkei, which had closed 8% lower yesterday, rebounded 6% higher today. Other risk assets, such as US futures and European stocks, were also trading higher. 

While risk assets, including Bitcoin are bouncing today, the backdrop remains highly uncertain. In order for a persistent recovery to take place Trump would need to walk back some of the tariffs or central banks step in to support economies. While the PBoC is stepping up support, the Federal Reserve has no real reason to step in just yet, given that jobs data remains resilient and inflation is still above target. 

Bitcoin technical analysis 

On the weekly chart, BTC is holding above the 50-week moving average (SMA) at 76.8k. This dynamic support is often considered to be the support below which a bear market comes into play. 

On a daily chart, BTC trades below its falling trendline dating back to early January. The 50 SMA is falling below the 200 SMA in a death cross signal, which could point to near-term weakness.  

Sellers will need to break below 78k and 74.4k, the 2025 low, to create a lower low and extend the bearish decline toward 70k. 

Should support around the 78k-80k level hold. Buyers will need to rise above the 200 SMA at 86.7k to gain momentum towards 90k. 

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