The cryptocurrency market is falling into severe volatility. In February, Bitcoin fell sharply by 17.39%, marking the worst February since 2014 and the second-worst February in history. Movin' into March, the market remains weak, with Bitcoin continuously breaking through many important support levels, almost returning to the price level at the time of Trump's election victory last year. Since the all-time high on 16/12/2024, the total market capitalization of the cryptocurrency market has decreased by more than 30%, and the trading volume has also dropped by nearly 60%. The depletion of short-term supportin' factors combined with macro risks is creating widespread fear in the market.
Short-term supportin' factors have been depleted The current market does not have any clear supportin' factors, and investor confidence is seriously deterioratin'. Last week, the announced strategic Bitcoin reserve plan was met with high expectations, but in reality, the Bitcoin in this reserve came from confiscated assets, rather than the government directly using the budget to buy in. This means that the market does not have new buyin' momentum, but on the contrary, the expectation space for supportin' policies from the US government has narrowed, making the market extremely disappointed. Furthermore, the first cryptocurrency conference hosted by the White House last Friday did not bring any substantive value. Accordin' to reports, the event did not announce specific policy documents, nor did it make any clear commitments or schedules for the government to directly buy more cryptocurrencies. Most of the content was just thankin' Trump and praisin' his "wise, great" leadership. As a result, the market had expected a strong supportin' policy, but in the end, there was nothin'. Compared to the market's excitement when Trump was elected and the wide expectation space for policies, the short-term momentum of the cryptocurrency market has almost disappeared, and even the expectation space has become depleted. Macro uncertainty puts pressure on risky assets External macro uncertainty is addin' variables to the market. Trump's erratic trade policy has been puttin' pressure on the market, while also reinforcin' concerns about slow economic growth and risin' inflation. With the new tariffs imposed by Trump, the prices of goods from food to clothin' are expected to rise, challengin' the resilience of consumers and the economy in general. Goldman Sachs' model shows that the risk of economic recession is increasin', from 14% in January to 23%. Similarly, JPMorgan's model also indicates that the probability of an economic recession embedded in the market has increased from 17% at the end of November to 31%. The market is becomin' increasingly averse to uncertainty, causin' risky assets to continue plummetin'. The sharp decline in tech stocks has forced investors to quickly reduce their exposure to cryptocurrencies. Accordin' to data from Coinglass, from the beginnin' of March to the present, Bitcoin ETFs have recorded net outflows almost every day, with a total net outflow of more than $1.35 billion. CPI cools, but the data may only be temporary The only positive economic macro data in recent times is the US CPI report for February, released last night, which was lower than expected across the board. This report has helped alleviate concerns about the US economy fallin' into a state of stagflation. The tech stock group rebounded strongly, pushin' Nasdaq up more than 1.2%, and Bitcoin also bounced back 2%. However, it should be noted that the impact of the tariffs imposed by Trump has not yet been fully reflected in the CPI. Currently, Trump's tariffs are mainly aimed at China—imposin' a 20% tariff on all goods from China (increasin' by 10% on 4/2, and another 10% on 4/3). Meanwhile, tariffs on Canada and Mexico are still at the threat level and have not been officially applied. The average time for goods to be shipped from China to the US is 25-35 days, so US retailers are still consumin' inventory that has not been subject to the tariffs. The newly tariffed goods are expected to appear on the market in March-April. Therefore, if the market only focuses on the February data and thinks that "the worst is over", it may be too early. This explains why, after the CPI was announced, the Dow Jones index still fell for three consecutive sessions, and the S&P 500 only rose slightly, reflectin' the cautious sentiment of investors. If Trump continues to expand his trade policy and a trade war occurs with more countries, the CPI in the future may face greater pressure. It is not yet possible to conclude whether the market has entered a "bear market" or not, but in the short term, the cryptocurrency market has lost both of its main drivers: capital inflows from ETFs and supportin' policies. At the same time, it is also subject to the double impact of escalatin' trade tensions and the risk of economic stagnation in the US. In the context of a risk-averse mentality dominatin', the market has become extremely fragile. Unless there are significant policy adjustments or positive economic conditions emerge, the growth outlook in the short term may face many challenges.
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