Bitcoin has rallied sharply, crossing the $81,500 mark on Wednesday following a wave of bullish sentiment triggered by a sweeping US. trade policy shift. The flagship cryptocurrency surged 7% in 24 hours to $81,576.15, driven by broad-based market optimism after President Donald Trump announced a temporary pause on certain tariff hikes and unveiled a new 10% blanket tariff on countries excluding China.

Despite the daily gains, Bitcoin remains down 2% on the weekly chart, indicating that macroeconomic concerns continue to weigh on investor confidence. Trading volume over the past 24 hours surged to more than $70 billion, signaling heightened activity following the announcement.

The broader crypto market echoed Bitcoin's move, with Ethereum jumping over 13% and other altcoins following suit. According to QCP Capital's report, $75 million worth of short positions were liquidated within an hour of the policy news, further accelerating the crypto market's upward momentum.‍

Policy Shock Lifts Risk Assets

President Trump’s announcement marked a dramatic shift in tone from his prior trade stance. While the 90-day tariff reprieve was welcomed by global markets, the introduction of a blanket 10% reciprocal tariff on most trading partners added complexity to the geopolitical landscape. The S&P 500 and Nasdaq responded with extraordinary gains, rallying 9.51% and 12.02%, respectively — among the largest single-day spikes in recent memory.

The crypto sector quickly followed suit, reflecting its growing sensitivity to macroeconomic policy shifts and investor appetite for alternative assets during periods of monetary uncertainty.‍

China in the Crosshairs

While Trump offered an olive branch to much of the world, he simultaneously escalated tensions with China. In a sharply worded post on his social media platform, the President announced a 125% tariff on Chinese imports, citing Beijing’s “lack of respect” for global markets. The Chinese yuan dropped to an 18-year low of 7.3498 in response, as analysts brace for potential retaliatory action from Beijing.

“If China responds forcefully, we could see this rally unravel quickly,” analysts noted, warning that current market euphoria could turn into a classic bull trap if trade tensions intensify.‍

Market Still Cautious Despite Spike

Despite the bullish breakout, caution prevails among institutional players. QCP reports continued topside selling in May and June options, suggesting traders are using the rally to reduce exposure. However, the purchase of December $100K BTC calls points to enduring long-term optimism for Bitcoin’s upside potential.

“The market is not out of the woods yet,” QCP said, emphasizing the importance of upcoming U.S. CPI data in shaping sentiment. A lower-than-expected inflation print could provide a tailwind for risk assets, helping counterbalance the inflationary implications of Trump’s blanket tariffs.

The Fear and Greed Index remains locked in the “Fear” zone at 39, underscoring lingering uncertainty despite price gains. Traders remain watchful for volatility, especially as macro events continue to shape risk appetites across both traditional and digital asset classes.