Crypto Market March Report: Under the shadow of the tariff war, BTC is expected to welcome a reversal in the second quarter

Economic and employment data have strengthened the market's expectations of "stagflation" and even "recession," leading to a significant decline in the U.S. stock market. The uncertainty surrounding Trump's tariff policy has become the biggest variable, driving the deterioration of U.S. economic and consumer confidence, which in turn raises concerns about "stagflation" and "recession." With the relatively "dovish" stance of the Federal Reserve Chairman, the market has begun to anticipate a possible interest rate cut in June, with expectations of the number of cuts rising from two to three. Although the inflation issue has been temporarily set aside, it has not disappeared and may actually worsen due to the intensification of the tariff war. The actual impact of the tariff war can only be assessed after the policy is implemented.

In March, the crypto market operated in a descending channel, and in extreme cases, BTC could drop to $73,000. BTC has been running within the descending channel since February, positioned below the first upward trend line of this cycle. Trading enthusiasm has plummeted, with trading volume decreasing week by week. Although centralized exchanges have seen outflows of BTC, there has been a small inflow into BTC ETFs. However, against the backdrop of volatility in the U.S. stock market, BTC, as a high-risk asset, struggles to attract buying power.

On the policy front, multiple positive developments emerged in March. The U.S. government established a "strategic Bitcoin reserve," marking the first time BTC is managed as a permanent national asset. The White House held a crypto summit, signaling support for crypto innovation. The Federal Deposit Insurance Corporation released guidelines to provide a compliance pathway for banks participating in crypto-related activities. Texas and California are advancing state-level Bitcoin reserve and equity bills respectively. These policies pave the way for the U.S. to become a "crypto capital," but it will take time to see actual effects.

The outflow of BTC Spot ETF funds has slowed down, with a net outflow of 634 million dollars this month, far lower than last month's 3.249 billion dollars. Stablecoins continued to flow in with 4.893 billion dollars. The inflow and outflow of ETF funds are synchronized with the fluctuations in BTC prices, reflecting that this round of adjustment is due to the spillover effects of U.S. stock volatility. The on-site funds did not exhibit independent behavior, only following market reactions.

Before the adjustments in February, a second wave of selling occurred among long-term holders, which was a response to the flood of liquidity and objectively suppressed the rise in BTC prices. Subsequently, the trading theme of U.S. stocks changed, and short-term holders began to sell off to hedge. After mid-February, long-term holders stopped selling and shifted to "increasing their holdings," reducing downward pressure in the market and the heat of chips, helping the price to reach a new equilibrium after the decline.

The losses caused by the current adjustment have exceeded the Carry Trade storm at the beginning of 2024, becoming the largest loss range in the new cycle since January 2023. A large number of BTC, originally priced in the range of $90,000 to $110,000, have entered the range of $76,000 to $90,000, partially addressing the issue of insufficient chip allocation in the $73,000 to $90,000 range.

Although short-term holders have completed a significant amount of selling, the overall chain profit and loss situation is still not optimistic. During this round of decline, the maximum unrealized loss for short-term holders reached 14%, and by the end of March, it was still at a 12% unrealized loss, which is under considerable pressure. If this pressure is converted into selling pressure, it may push BTC down to around 73000 dollars.

Looking to the future, the price of BTC is constrained by the chaotic tariff policies, the economic expectations caused by sticky inflation, and the game between whether the Federal Reserve will cut interest rates. Internally, short-term holders have already experienced the largest scale of selling losses in this cycle; the current selling pressure has shrunk but still exists. Long-term holders have shifted from selling to increasing their holdings, playing a stabilizing role in the market.

On April 2, Trump's tariff policy will reach a phase peak, and the US stock market may see a short to medium-term bottom. If the tariff policy does not deteriorate excessively, the US economy shows signs of recession but not severely, and the Federal Reserve cuts interest rates in June, then BTC is expected to welcome a reversal in the second quarter. After the turmoil in the first quarter, the outlook for the second quarter remains unclear, but the most difficult period may have passed. Once Washington and the Federal Reserve restore rational competition, the market is expected to return to its own operating rules.