The crypto market is in a state of turmoil. In February, Bitcoin plunged 17.39%, the worst February performance since 2014 and the second worst February in history. In March, the market remained weak, and Bitcoin fell below several key support levels, basically returning to the level when Trump won the election last year. Since hitting a record high on December 16, 2024, the total market value of the crypto market has fallen by more than 30%, and trading volume has fallen by nearly 60%. The exhaustion of short-term positives and the interweaving of macro risks are causing widespread panic in the market.
Short-term positives are exhausted
There is no substantial positive news visible in the current market, and market confidence has been severely frustrated. Last week, the much-anticipated Bitcoin strategic reserve plan was finalized, but the reserve only obtained Bitcoin through confiscation procedures, rather than directly using fiscal funds to purchase. This means that the market has not ushered in new buying momentum, but has further compressed the market's imagination of "US government policy benefits", which has greatly disappointed the market.
In addition, the first cryptocurrency summit held by the White House last Friday also failed to bring anything substantial. According to reports, no specific policy documents were released during the entire event, and no clear guarantees or timetables were provided for the direct purchase of new cryptocurrencies. Most of the speeches were just thanks to Trump and praise for his "wisdom and bravery", and none of the policy benefits expected by the market were achieved.
Compared with the market enthusiasm and grand policy imagination space when Trump was elected, the short-term driving force of the current cryptocurrency circle has almost disappeared, and even the imagination space is lacking.
Macro uncertainty weighs on risk assets
External macro-uncertainties are adding variables to the market. While Trump's erratic tariff policies have hit the market one after another, they are also strengthening the market's expectations of slowing economic growth and rising inflation.
As Trump rolls out a series of tariffs, prices for everything from food to clothing are expected to rise, testing the resilience of consumers and the broader economy. Goldman Sachs Group Inc.’s model shows that the risk of a recession is rising, rising to 23% from 14% in January. A similar model from JPMorgan Chase & Co. also shows that the market-implied probability of a recession has climbed to 31% from 17% at the end of November.
The market is increasingly tired of uncertainty, and risky assets continue to fall. The rout of technology stocks has forced investors to accelerate the reduction of cryptocurrency risk exposure. According to Coinglass data, since March, Bitcoin spot ETFs have experienced net outflows almost every day, with a total net outflow of more than $1.35 billion.
CPI cools, but data may be temporary
The only good news about the recent major macroeconomic data is that the US CPI for February released last night was lower than expected across the board. This much-needed report by the market has eased the anxiety that the US economy may fall into the quagmire of stagflation. The strong rebound of technology stocks led the Nasdaq to rise by more than 1.2%, and Bitcoin also rebounded by 2%. However, it should be noted that Trump's tariffs have not yet fully penetrated into the CPI.
The tariff stick wielded by Trump has currently mainly fallen on China - a 20% tariff has been imposed on all Chinese goods (a 10% increase on February 4 and another 10% increase on March 4). The tariffs on Canada and Mexico are still in the threat stage and have not yet been implemented.
Generally speaking, it takes an average of 25-35 days for shipping from China to the United States. Most of the current sales of American retailers are tariff-free stocks, and the newly purchased taxed goods are expected to enter the terminal sales from March to April. Therefore, if the market only focuses on the February data, it may be too early to think that "the worst moment is over." Therefore, after the release of CPI data last night, the three consecutive declines of the Dow Jones and the limited increase of the S&P reflect the cautious sentiment of the market.
If Trump's tariff policy continues to expand and tariff wars break out with more countries, the subsequent CPI will most likely face a greater impact.
Whether the market has entered a bear market is still inconclusive. However, in the short term, the current crypto market has lost endogenous catalysts such as "ETF capital inflows" and "policy benefits", and is exposed to the double pressure of the expansion and escalation of the tariff war and the risk of stagflation in the US economy. The market dominated by risk aversion is extremely fragile. Unless key policy adjustments or favorable economic conditions drive it, it may be difficult to achieve a sustained bullish momentum in the short term.
