GuShiio.com Determine what necessary conditions are needed for the market to regain its bullish sentiment.
Author:Alea Research
Compiled by: Tim, PANews
In yesterday’s report, we discussed several structural changes that have occurred in the cryptocurrency market over the past few months. Today, the U.S. market has not yet opened, the total market value of the crypto sector has fallen by nearly 9%, and Bitcoin has fallen by more than 7% in the past 24 hours. Although Bitcoin rebounded to the $89000 mark after hitting a new low above $87000, the current trend has shown signs of fatigue.
In today’s report, we will once again review the market trend, try to clarify the causes of the current downward trend of cryptocurrencies, and determine what necessary conditions are needed for the market to regain its bullish sentiment.
Current macro and encryption environment
In the past year, the overall trend of the crypto market has been highly correlated with Bitcoin. Starting from the second quarter of 2024, Bitcoin and altcoins have entered a period of sideways shocks for about half a year. With the arrival of the catalyst for the U.S. election in November, the entire crypto market has risen almost across the board. However, this pattern has recently taken a sharp turn for the worse, as evidenced by the rapid divergence between Bitcoin and Altcoins.
The sell-off did not clearly point to a trigger in the cryptocurrency space. We have discussed in detail the Libra token crash and the recent attack on Bybit in our member newsletters and emails. The chain reaction triggered by the Libra token has hit the Solana ecosystem hard, with SOL tokens plummeting nearly 45% in the past month. The Bybit incident is now basically under control, and the exchange claims to have raised enough ETH to fill a funding gap of approximately US$1.4 billion.
There were even good news yesterday:Castle Securities announced that it will increase its deployment in the encryption field, which may be related to the gradual clarity of the regulatory environment.
Robinhood previously disclosed that one-third of its fourth-quarter revenue came from encryption services and plans to continue to increase its investment in this field.However, the market responded lukewarm to the good news of the entry of such traditional financial institutions.
Castle Securities announced that it will increase its deployment in the field of cryptocurrency market-making
Currently, the market may pay more attention to news from the U.S. government,We have reservations about any policy move that does not reach the Strategic Bitcoin Reserve(SBR) level, and even regard it as an all-out selling opportunity.This trend can be seen from the market’s reaction to the statements and even executive orders of President Trump, Director of Encryption and Artificial Intelligence David Sacks, and Senator Cynthia Lummis on cryptocurrencies.
Current market fluctuations may be largely related to Trump’s policies and the unexpected reactions they have triggered. On some levels, the former president is polarized in fulfilling his campaign promises:Some policies involving core market concerns have insufficient implementation, while other areas have exceeded expectations. This contradiction is exacerbating market uncertainty.
Trump has repeated it many times since taking office: first announced additional tariffs on Canada and Mexico, and then suspended the implementation; then implemented a new metal tariff policy that affected Canada and Mexico; recently announced that comprehensive tariffs would still be implemented on these two countries. This kind of changing orders every day not only exacerbates market uncertainty, but is also likely to fall into a policy credit dilemma.
2. immigration policy
The Trump administration has so far repatriated fewer illegal immigrants than previous administrations. This may be a positive signal for the market, as large-scale rapid repatriation could lead to market shocks in labor-intensive industries such as agriculture, housing construction and services.
3. foreign policy
The Trump administration has shown a tendency to alienate Europe and negotiate directly with Russia, bypassing regional countries such as Ukraine. Although this move may not be a major negative that triggered a unilateral reaction in the market, it did catch some observers off guard.
Markets have always hated uncertainty, and the Trump administration fully demonstrated its ability to create uncertainty in its first month in office. Year-to-date, U.S. stocks have underperformed European stocks and China stocks, and the Nasdaq index has almost fallen into negative range. This may reasonably explain why cryptocurrencies performed poorly in the first quarter:Although Michael Saylor’s strategic hoarding of coins brought liquidity support and ETF capital inflows, which still kept Bitcoin at a relatively high level, the overall crypto market performance still showed a significant lag.
Goals turn sharply,Heavy debt and light stocks?
Both cryptocurrencies and U.S. stocks have been weak, which may be closely related to the Trump administration’s policy focus on driving down bond yields rather than pushing up stocks (not to mention bitcoin prices, the White House has actually paid little attention to the overall performance of the crypto market). If lowering bond market yields is regarded as a measure of policy success, the current situation may be more optimistic than when judged solely based on stock market performance.
Since Trump took office, U.S. ten-year Treasury yields have fallen significantly. This indicator could serve as an alternative benchmark for assessing the long-term resilience of the U.S. economy: lower interest rates help reduce the cost of capital for homebuyers, large businesses and other groups.
Under the current macro landscape, the U.S. government needs to seek a balance between short-term interests and long-term goals, that is, the stock market carnival may not meet the success criteria set by the Trump team. Over time, the market may gradually adapt to the unconventional practices of this administration. On the positive side, if regulatory barriers can be substantially eliminated (as DOGE metaphors), more economic vitality may be released. But in the short to medium term, the federal government’s massive layoffs and budget cuts may have a contractionary effect on the economy and intercept some of the funds that could have been injected into the market.
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