Crypto Market Weekly Report: Economic Data Mixed, Market Pauses Adjustment but Outlook Remains Unclear

This week, the price of Bitcoin showed a narrow range of fluctuations, opening at $80,708 and ultimately closing at $82,562, marking a weekly increase of 2.31%. Despite a continuous decline in trading volume, the price still experienced a slight rebound within the descending channel.

The inflation data released by the United States was slightly better than expected, and with signs of easing in the Russia-Ukraine conflict, it provided a brief respite for the stock market and the crypto market. However, market valuations are still on a downward trend, and historical data indicates that there may be further room for a pullback.

The fundamental reason for the decline in valuation - the chaotic tariff policy may trigger inflation, raising concerns that the U.S. economy could fall into "stagflation" has not yet dissipated. The uncertainty of the policy continues, and the Federal Reserve still insists on a data-driven stance. This situation makes it difficult for the concerns of "stagflation" to dissipate; the longer it lasts, the greater the potential for a downward adjustment in valuation. This is also why we hold a cautious attitude towards the short-term rebound of Bitcoin.

Macroeconomic Data Analysis

This week's CPI data released by the United States was slightly lower than expected, with the unadjusted CPI for February rising 2.8% year-on-year and 0.2% month-on-month. This data has somewhat alleviated the market panic triggered by last week's employment figures.

As a result, US stocks rebounded slightly, but the overall trend still shows a decline. The Nasdaq index remains below the 250-day moving average, with a weekly decline narrowing to 2.43%; the S&P 500 index has risen above the 250-day moving average; the Dow Jones index fell by 3.07%, barely holding above the 250-day moving average.

The preliminary consumer confidence index for March released by the University of Michigan fell sharply to 57.9, well below the expected 63.1. At the same time, the one-year inflation expectation rose to 4.9%, indicating increased consumer concerns about the economic outlook. This data reflects the negative impact of current economic policies on consumer confidence.

On Friday, global stock markets generally rebounded, largely benefiting from the hope that both Russia and Ukraine will reach a 30-day ceasefire agreement.

In the long term, the current adjustment in the US stock market may stem from a valuation correction triggered by expectations of interest rate cuts. The Shiller Price-Earnings Ratio (CAPE) of the S&P 500 has fallen from a high of 37.80 in December last year and is currently still at a relatively high level of 34.75. If it were to revert to the 20-year historical average of 27.25, there would still be more than a 21% decline potential. However, we believe the likelihood of such a deep adjustment occurring is low, unless there are serious policy missteps that lead to a true economic recession.

In the market fluctuations, risk aversion drove gold prices to briefly break through $3000 per ounce. The dollar index rose slightly, and US Treasury yields increased slightly, indicating that some funds are beginning to shift from the bond market to the stock market in search of opportunities.

Overall, the US stock market has entered a correction phase, but the inflation outlook and interest rate cut expectations remain unclear. Policy uncertainty persists, and the market may need further adjustment to adapt to the new economic environment. Considering the correlation between Bitcoin spot ETFs and US stocks, we expect Bitcoin prices may still drop to around $73,000 in the next two months.

Capital Flow Analysis

This week, the overall inflow of funds in the crypto market has shown a slowing trend. Bitcoin spot ETFs had a net outflow of $842 million, Ethereum spot ETFs had a net outflow of $184 million, while stablecoins saw an inflow of $1.264 billion. Although the scale of net inflows has decreased, existing funds have re-entered the exchanges, providing support for Bitcoin's price to return to $83,000. However, this current inflow of funds appears more like small-scale bottom fishing, which is still insufficient to reverse the overall market trend.

Market Sentiment and Position Analysis

Short-term investors continue to face pressure, with an average unrealized loss of about 9%. This group of investors has been both a driving force behind the recent decline and the primary bearers of the losses. In future market fluctuations, they may become a potential source of selling pressure leading to further declines.

In contrast, long-term holders have shifted from reducing their holdings to increasing them during the downturn over the past three weeks, accumulating approximately 100,000 Bitcoins. Large investors (whales) have also increased their holdings by nearly 60,000, with their average cost generally below $80,000. These two types of investors have historically played the role of stabilizers in the market, and their accumulation behavior is worth noting.

Market Cycle Judgment

According to professional indicators, the current Bitcoin market is in a rising continuation phase, but caution is still needed for potential fluctuations in the short term. Investors should closely monitor global economic data and policy changes, operate cautiously, and manage risks.