A hawkish macroeconomic shift coupled with tug-of-war in the Middle East suggests the crypto market is poised for a bottoming out.

Article author and source: BitMart

I. Macro Level

1. Geopolitical conflicts and oil price transmission

The situation in the Middle East will likely remain one of "fighting while negotiating," with little prospect of substantial easing in the next 2-4 weeks. Trump, driven by election considerations, intends to de-escalate tensions in the first half of the year to avoid pressure on oil prices and the stock market. If risks to key waterways such as the Strait of Hormuz increase, oil prices are more likely to rise than fall. The probability of the US directly launching a ground war is low; it is more inclined towards proxy intervention and control of energy routes. A 10% increase in oil prices typically pushes up inflation by about 0.5% and suppresses GDP growth by 0.1%-0.2%. The market may have underestimated the cascading risks of stagflation and even recession.

2. Global monetary policy hawkish repricing

The Federal Reserve, the European Central Bank, the Bank of England, and other central banks have collectively shifted to a hawkish stance, with the FOMC meeting leaning towards a hawkish tone: the dot plot shows an increase in members supporting only one rate cut this year, inflation expectations have been revised upward, Powell downplayed signs of a weakening labor market, and even dovish official Waller supported a pause in rate cuts. The market has begun pricing in the possibility of "no rate cuts or even further rate hikes."

Policies in Europe and the US are diverging: Europe is more sensitive to imported oil price inflation, and a sustained oil price above $100 could force the ECB to raise interest rates; the US, on the other hand, would only resume interest rate hikes if oil prices remain above $130 for an extended period. US Treasury yields are showing a "bear market steepening."

3. Divergence between the risks of stagflation and recession

One side argues that with questionable non-farm payroll data and inflation consistently above the 2% target, the US economy is vulnerable to stagflation or even recession under external shocks, and market pricing is insufficient. The other side argues that the US is already a net energy exporter, and high oil prices alone cannot replicate the stagflation of the 1970s; the greater risk comes from fiscal expansion and a weakening of the Federal Reserve's independence. If key straits are blocked for an extended period, and the Fed maintains a hawkish stance or even raises interest rates, the market's main theme will shift from a "stagflation trade" to a "recession trade."

4. Performance of Traditional Assets and Hedging Strategies

Gold prices fell sharply amid tightening expectations and liquidity pressures, rendering its safe-haven appeal temporarily ineffective. The market saw crude oil and the US dollar rise in tandem, while risk assets generally declined, indicating a loss of correlation among traditional assets and a pullback in macro hedging strategies. The AI sector is currently overvalued, and if capital expenditures fail to translate into profits, there is pressure for valuation contraction.

Hedging recommendations: Allocate VIX-related positions, natural gas and fertilizer stocks as defensive tools; after weathering the 1-3 month period of volatility, risk assets are expected to see a recovery opportunity in the second half of the year.

II. Cryptocurrency Level

1. Market Trends and Relative Resilience

Amidst pressure on global risk assets, BTC has demonstrated relative resilience compared to gold, fluctuating around the $70,000 range after consolidating from $76,000. Current spot and futures trading volumes are sluggish, while the options market is relatively active, with put option skew rising, indicating a slight increase in market risk aversion and panic.

2. Divergent trends in institutional fund flows

MicroStrategy's Bitcoin buying activity has cooled significantly, with weekly increases dropping to around 1,000 coins; however, other institutions continue to buy ETH on a large scale, averaging around 60,000 coins per week. BTC spot ETFs maintained a slight net inflow overall, but turned to a slight net outflow this week. The ETF holdings' MVRV is approximately 1.07, and the price is approaching the overall cost range of institutional holdings.

3. On-chain and derivatives signals

Long-term holders' profit levels have fallen back to the bottom range of the previous cycle, and the most rapid decline in the market may have ended, gradually entering the bottoming phase; short-term holders took profits around $76,000, creating some selling pressure.

The spot CVD is negative, indicating that active selling dominates, but the contract open interest has risen slightly against the trend during the decline. The perpetual funding rate remains negative, and short-selling is relatively crowded, suggesting a possible technical short squeeze rebound in the short term.

4. Regulatory Benefits and Market Outlook

The Clarity Act, a cryptocurrency regulatory bill, faces less resistance in the Senate, with its probability of passage rising to 80%–90%. The banking system is expected to ease restrictions, allowing users to indirectly participate in stablecoin interest-bearing products and opening channels for traditional institutional funds to enter the market.

Short-term: With short sellers crowded in, be wary of a short squeeze-driven technical rebound.

Mid-term: Overall unprofitability remains higher than the bottom of the previous bear market. Before profitable positions are fully liquidated, the market will need time to solidify its bottom, and a second dip is possible.

This article is for market trend analysis only and does not constitute investment advice. Digital asset investment carries high risks; investors should make prudent decisions and bear the associated risks themselves.