Source: Talk Outside the Lines
Let's start with a brief review of the recent turbulence:
On March 2 (Beijing time), Trump posted on Truth Social that the US will advance a crypto strategic reserve including BTC, ETH, XRP, SOL, ADA, and ensure the US becomes the world's crypto capital.
Buoyed by this sudden news, the market began to surge rapidly, with BTC jumping from $85,000 to $95,000, ETH up 18%, XRP up 38%, SOL up 29%, and ADA soaring 80%.
However, this surge did not last long. With the opening of the US stock market on March 3, coupled with the impact of tariff news, Bitcoins and various Altcoins also began to plummet rapidly. In just about a day, the market had completely erased all the gains triggered by Trump's "strategic reserve" news.
As there is an expected White House crypto summit on March 8 (Beijing time), the market has been fluctuating in the past few days. However, news has emerged today (March 7, Beijing time) that Trump has already signed an executive order to formally establish a US strategic Bitcoin reserve, as shown in the image below.
But after this news spread quickly, the market has instead re-entered a rapid downward trend, with Bitcoin falling 6% within half an hour, as shown in the image below.
Here, we may need to continue to think about a few questions:
Are the recent market surges and plunges an illusion? Or are whales deliberately manipulating the market and buying in at low prices?
The US has given Bitcoin a national reserve status similar to gold. In the long run, this will certainly enhance Bitcoin's legitimacy and value support, but why is the market's reaction a rapid decline?
Building on our previous articles, let's continue to discuss this topic simply:
1. About the Bitcoin strategic reserve
To be honest, a few years ago, I never dared to imagine that Bitcoin could be included in the US strategic reserve. I only thought that if Bitcoin could be approved for a spot ETF, that would be a huge milestone.
But since Trump's election victory, as mentioned in our previous articles, the US crypto strategic reserve has become a matter of time, not a question of whether it will happen.
From a long-term perspective, the world's most developed and influential country being able to include Bitcoin in its strategic reserve is equivalent to giving Bitcoin a national reserve status similar to gold (although the US's gold reserve has already lost its original meaning). This will certainly enhance Bitcoin's legitimacy and value support, and also be beneficial for the healthier development of the crypto industry (rather than the completely unregulated barbaric development, of course, healthy development also means that the opportunities for ordinary people to get rich will become fewer and more difficult).
Of course, you can also see the US Bitcoin strategic reserve as a new conspiracy or scam, and I won't refute that - everyone can have their own perspective on the issue.
But from a short-term speculative perspective, the reason why the market is plummeting rapidly today after the news that Trump has officially signed an executive order to establish a Bitcoin strategic reserve may include:
- The market interprets the news as the shoe dropping
It is a common saying in the investment field that good news is bad news when it materializes. Today's news can be understood as a kind of materialization of the US Bitcoin strategic reserve, so it may have triggered some speculative selling.
- Discrepancy between expectations and actual policy
Many people expected that once the Bitcoin strategic reserve is established, the Trump administration would use fiscal funds to buy more Bitcoin. But based on today's news, the executive order signed by Trump mainly mentions that the source of the Bitcoin reserve funds is limited to forfeited proceeds, and will not increase the tax burden on taxpayers. This is directly interpreted by people as the Trump administration not directly investing new funds to purchase Bitcoin.
Although the public information also mentions that "the Treasury and Commerce Departments can develop plans to acquire more Bitcoin without increasing the tax burden on taxpayers", it still fails to prevent people's disappointment. The greater the expectation, the greater the disappointment.
Of course, the above are just some relatively intuitive reasons. The market's decline is often determined by a combination of factors, such as the narrative, economic, and policy aspects we mentioned in our previous articles. Short-term market movements are more a direct reflection of changes in people's emotions influenced by news.
Since there will be a White House crypto summit tomorrow (March 8, Beijing time), we don't know what new policy news may emerge, and this will also have an immediate impact on the short-term market. So we should continue to pay attention.
But if we take a longer-term view, as the US crypto strategic reserve policy is implemented and advanced (which also takes time), it can be foreseen that some big whales/institutions will inevitably continue to accumulate more Bitcoin positions, and even some other countries may also announce their own crypto strategic reserve plans this year or next.
Remember the quote we shared in an article two years ago: the two best times to own Bitcoin are ten years ago and now. I still choose to say this today.
2. About the market's outlook
In the previous article (March 5), we mentioned a global liquidity issue, as shown in the image below.
In fact, since last year, the market (market participants) has been eagerly awaiting the end of the US quantitative tightening (QT). But based on the latest FOMC meeting results, we may not see any possible opportunities in this regard until as early as June this year, and during this process, it is undoubtedly the biggest negative factor for high-risk asset classes like crypto.
According to public data, the US government's debt has now reached a ceiling of $36 trillion. This seems to mean that the government cannot borrow more money until Congress raises or suspends the limit. Although Musk's efficiency department has been working to reduce government spending since Trump took office, the huge US government still needs to spend more money to maintain its operations. So what will they do?
Here we notice the data of the TGA (Treasury General Account), which is the checking account the US Treasury Department has opened at the Federal Reserve. As of the time of writing, there is still nearly $522.8 billion in the TGA. As shown in the image below.
Combining the data we mentioned earlier, the US government may now be spending from the TGA account to maintain operations and provide liquidity support. At the same time, I've also recently found news online saying that the risk of the US government shutting down is increasing, which may also be based on the considerations we just mentioned. But I don't think a government shutdown will happen under Trump's watch, the probability of a full-scale occurrence is not high.
The fundamental of any market is liquidity. As long as liquidity remains, opportunities will be there.
In addition to the continued maintenance of liquidity from the TGA, we have also seen some changes in other crypto-related policies recently, which we have described in the previous article (March 5) and will not repeat here. As shown in the image below.
The continued relaxation of SEC policies, coupled with the increasing number of Altcoin ETF applications or entering the review stage this year, compared to the crypto market in previous years, we seem to have never encountered a "so good" regulatory environment. This is also one of the reasons why I have consistently maintained an overall optimistic outlook for the first quarter - second quarter of this year in my previous articles (of course, I do not rule out the possibility of any new black swan events occurring during this period, which would be a different story).
In simple terms, the first White House Cryptocurrency Summit on March 8, the first Cryptocurrency Roundtable on March 21, and the potential approval of more new Altcoin ETFs in the second quarter of this year... In the long run, the industry is getting better and better. In the short term, however, people seem to be increasingly pessimistic. This is a very interesting phenomenon.
Of course, this pessimistic sentiment is also very understandable, the main problems include:
- Severely diluted under the condition of insufficient liquidity
Remember in the article on January 20, we also mentioned: the sign of the cyclical end of this bull market is likely to be the issuance of Memes by celebrities, but I didn't expect the celebrity leading the issuance of coins to be the President of the United States. As shown in the figure below.
In the case of insufficient market liquidity, the current cycle has given birth to a large number of new projects, a large number of VC projects continue to unlock and sell pressure, and liquidity is constantly being drained, all of which have exacerbated the violent fluctuations in the market, which is one of the problems leading to people's pessimistic sentiment.
- Concerns about economic recession
In recent weeks, we have continued to see reports and data on concerns about (US) economic recession, such as the latest forecast report (GDPNow model) released by the Atlanta Fed last week (February 28), which shows that the US economy will contract by 1.5% in the first quarter. If this becomes a reality, it will be the first quarterly decline in the US economy since the first quarter of 2022.
For example, the recently released US manufacturing PMI data was also lower than expected (the US manufacturing PMI in February 2025 was 50.3%, down 0.6 percentage points from the previous month), also indicating that the US economy is slowing down.
Looking at the CPI and PPI data together, the US seems to be facing a stagflation problem. And it is precisely because of the stagflation problem that the Fed cannot directly continue to cut interest rates, because interest rate cuts usually increase the risk of inflation, and of course they cannot raise interest rates again, because interest rate hikes will lead to further economic slowdown. This looks like a dilemma, and this kind of situation leaves the market with overall turmoil and unease.
The macroeconomic situation was already facing a dilemma, but after the troublemaker Trump took office, he started a trade war again, which undoubtedly will continue to drive up the risk of inflation, especially for high-risk assets like cryptocurrencies, which is undoubtedly a pessimistic fundamental factor.
So, should the market outlook be bullish or bearish going forward?
I don't know. In fact, I think in the short term, whether to be bullish or bearish is not important, ultimately it still depends on your own position and trading style.
If we look back, from the end of last year to now, Bitcoin has experienced a sustained and repeated fluctuation in the range of $7-10,000, theoretically the market should have already digested the expected positive or negative impact of various news, although many Altcoins have been bloodbath, Bitcoin as a whole still looks relatively "healthy", maybe Bitcoin may continue to fall to the $7,000 level, but I will definitely continue to hold the cake and watch the show and maintain my trading discipline and established goals.
The market is actually very interesting, usually most people tend to be bearish at the bottom and bullish at the top. As for myself, when people generally see Bitcoin at $7,000 or even lower, I will choose to see $10,000 or even higher. Because I have enough time and patience, when more and more people choose to give up due to pessimism, I myself am actually more excited about the potential performance of the market going forward.
The reason why I read news, watch charts, etc. is mainly for the need to write articles (self-media), in terms of trading (holding Bitcoin), I can actually go for a few months without reading news, and only occasionally look at the weekly charts. When you simplify the seemingly complex short-term things through the time dimension and quantification dimension, the logic here is actually not complicated, you don't even need to watch the market or read the news every day.
In short, the market is uncontrollable, the only thing we can control is our own position. Most people only have the ability to make slow money, but always hope to make quick money, if you can't reasonably recognize yourself, then the most likely outcome is to lose money. In the short term, the market will still face various uncertainties, but in the long run, I (at least myself) will continue to maintain awe of the market while maintaining overall optimism.
At the end of the article, let's review the current Bitcoin holdings of major institutions and governments. As shown in the figure below.
That's all for today, the sources of the pictures/data mentioned in the text have been supplemented in the Notion of Followin. In addition, we sorted out a lot of methodological content last year, which has been compiled into the e-book "Blockchain Methodology" (Volume 1 + Volume 2), with a total of about 620,000 words. Readers with patience can consider reviewing and reading more content in the e-book, click here to enter the portal>>
Source of the article: https://mp.weixin.qq.com/s/uEu7U5NnHvub-eSMPupMiQ
