According to the latest data from Polymarket, the market is betting that the probability of the Federal Reserve keeping rates unchanged this year has risen to 44%.
Written by: Mahe, Foresight News
A major rebound in the crypto market remains a long way off. On April 13, the price of BTC hovered around $71,000, down about 2.6% in 24 hours. ETH performed even worse, falling 3.63% to around $2,200. Bitcoin's market capitalization still accounts for 58.8%, and trading volume across the entire crypto sector has not increased significantly.
According to Coinglass data, $284 million in positions were liquidated across the network in the past 24 hours, with $203 million in long positions being liquidated. Meanwhile, the CoinMarketCap fear index is currently at 43, indicating a neutral market sentiment.
Traditional financial markets also experienced significant volatility. Affected by the situation in the Middle East, international oil prices remained high, with Brent crude oil once approaching $107 per barrel, a sharp increase from pre-conflict levels. In the US stock market, the S&P 500 fell by approximately 5% in March, one of its worst monthly performances in recent years; international stock markets, dragged down by energy import pressures and a stronger dollar, saw even larger declines. Rising bond yields and renewed inflation expectations led investors to rapidly switch between risky assets, pushing up demand for traditional safe-haven assets such as gold. This cross-market correlation further confirms that cryptocurrencies, as high-beta risk assets, are simultaneously experiencing both macroeconomic and geopolitical shocks.
US-Iran negotiations break down
One of the key drivers of this week's slump in the crypto market was the sharp escalation of tensions between the US and Iran. The face-to-face peace talks between the US and Iran, held in Islamabad, Pakistan on April 11-12, lasted more than 20 hours but ultimately ended in failure.
U.S. Vice President Vance's delegation and the Iranian delegation failed to reach an agreement on core differences, including Iran's "red line" of abandoning its nuclear weapons program and halting uranium enrichment. Iran, in turn, accused the U.S. of "maximumism" and "constantly changing its objectives."
Vance departed Islamabad aboard Air Force Two.
Following the breakdown of negotiations, US President Trump announced on social media on Sunday that the US military would immediately begin a blockade of the Strait of Hormuz. US Central Command (CENTCOM) subsequently confirmed that at 10 PM Beijing time on April 13, the blockade would target all ships entering or leaving Iranian ports, but would not obstruct normal passage through non-Iranian ports. Iran's foreign minister and military quickly responded, warning that any military vessels approaching the strait would be considered a violation of the ceasefire and reserving the right to retaliate.
The Strait of Hormuz is a vital chokepoint for global oil transportation, handling approximately 20% of the world's crude oil shipments. If a blockade continues, the risk of supply chain disruptions will directly drive up oil prices, further fueling global inflation concerns and expectations of slower economic growth. Such geopolitical black swan events have the most direct impact on risk assets: investors are withdrawing from high-beta assets and turning to cash or gold. BTC's safe-haven properties as "digital gold" are suppressed by risk aversion in the short term, failing to provide a hedging effect. In past crises similar to the Middle East crisis, the crypto market often reacted earlier than traditional markets, experiencing a sharp correction, which is a direct reflection of the current downturn.
According to the latest data from Polymarket, the probability of the United States and Iran reaching a permanent peace agreement before May 31 this year is 27%, while the probability of reaching an agreement before the 30th of this month drops to 14%.
However, the future of US-Iran negotiations remains uncertain.
According to The Wall Street Journal, informed officials revealed that Middle Eastern countries are vying to bring the United States and Iran back to the negotiating table after marathon peace talks in Islamabad failed to reach an agreement.
Despite strong statements from both the US and Iran, diplomatic doors remain open, and a second round of talks could take place within days. Regional countries are negotiating with the US to secure an extension of the fragile two-week ceasefire.
The Federal Reserve may only cut interest rates once this year.
Another key suppressive factor comes from monetary policy. The minutes of the Federal Reserve's March meeting showed that despite the high degree of uncertainty brought about by the Iranian conflict, policymakers maintained their expectation of only one rate cut in 2026.
On April 10th, CPI data was released. The US March unadjusted CPI annual rate was 3.3%, a new high since May 2024, in line with market expectations of 3.3%, compared to the previous value of 2.40%. The US March seasonally adjusted CPI monthly rate was 0.9%, a new high since June 2022, also in line with market expectations. The US Bureau of Labor Statistics stated that the record rise in gasoline prices contributed nearly three-quarters of the month's CPI increase. Another indicator excluding food and energy costs saw its month-on-month increase slow to 0.2%.
The market had initially hoped for a more aggressive easing cycle to boost risk assets, but the oil price shock has made the Federal Reserve's "data-dependent" strategy more conservative. Higher energy costs may delay the decline in inflation, thus postponing interest rate cuts. This is undoubtedly adding insult to injury for the highly liquidity-dependent crypto market. Historically, the failure of interest rate cut expectations has often been accompanied by a valuation reset of risk assets, and BTC's current consolidation around $71,000 is a reflection of this adjustment in macroeconomic expectations.
The latest data from Polymarket shows that the market is betting on only a 26% probability of the Federal Reserve cutting interest rates by 25 basis points once this year, while the probability of it holding rates steady has risen to 44%.
Tightening market liquidity has cast a shadow over the cryptocurrency market's rebound.
Profit-taking suppressed the BTC price rebound.
On-chain data metrics accurately reflect the true intentions of crypto players. Glassnode data shows that any attempt to reach the $70,000 to $80,000 range faces insufficient liquidity and profit-taking pressure, thus limiting the rebound potential.
Another rally to above $70,000 was exhausted by profit-taking exceeding $20 million per hour.
Some sellers may believe that this BTC rebound is only temporary and not a reversal.
Currently, with the price of BTC at $70,800, the number of addresses in a loss-making state is approximately 13.5 million.
This indicates that a significant portion of users on the network purchased Bitcoin at a price higher than the current spot price.
Subsequent market trends
Despite short-term pressures, most veterans in the crypto industry remain structurally optimistic about the long term.
Michael Saylor, founder of Strategy, believes Bitcoin likely bottomed out around $60,000 in early February, as traders forced to sell at that time have been shaken out of the market. He argues that the bottom was determined more by the exhaustion of sellers than by valuation. He believes current selling pressure is limited, with ETF inflows absorbing daily supply and continued demand from companies allocating treasury assets to Bitcoin. Saylor predicts the catalyst for the next bull market will be the formation of a banking and digital credit system built on Bitcoin, transforming it from a non-interest-bearing asset into a capital market engine.
BitMEX founder Arthur Hayes stated at the end of March, "There is a lot of wishful thinking about a positive future in the current market. I personally hope the killing will stop, but I will not buy risky assets here."
Tom Lee wrote that there are increasing signs that the market has "bottomed out," although the overall market remains skeptical. If you remain skeptical, you might consider buying assets that outperformed during the Iraq War.
