Crypto Assets Market Weekly Report: Economic Data Slightly Exceeds Expectations, Market Temporarily Breathes Easy

This week, Bitcoin opened at $80,708.21 and closed at $82,562.57, with a weekly increase of 2.31%, a fluctuation of 10.86%, and trading volume continuing to decline compared to last week. The price of Bitcoin is operating in a downward channel, showing a slight rebound.

The CPI data released by the United States was slightly higher than expected, while signs of easing in the Russia-Ukraine conflict have provided a brief respite for the US stock market and the Bitcoin market.

However, the valuation of the U.S. stock market is still in the process of declining and finding a bottom, and historical data indicates that there is still room for further decline. The main factor driving the decrease in valuation—the chaotic tariff policy that could trigger inflation—has not alleviated concerns about the U.S. economy falling into "stagflation." Policymakers do not seem prepared to change their stance, and the Federal Reserve Chairman continues to adhere to a data-driven approach.

This state of chaos and stagnation makes the concern of "stagflation" difficult to dissipate; the longer it lasts, the greater the room for valuation downgrades. This is also the reason why we are cautious about the short-term rebound of Bitcoin.

Macroeconomic Data Analysis

Last week, the employment data released by the United States showed that non-farm payrolls were slightly below expectations, and the unemployment rate rose slightly, indicating signs of a slowdown in the job market. This has heightened concerns about a recession in the U.S. economy, leading to a significant market decline.

This week, the latest CPI data released by the United States showed that the unadjusted CPI for February rose 2.8% year-on-year, slightly lower than the expected 2.9%, and the previous value was 3%; the adjusted CPI for February rose 0.2% month-on-month, with an expectation of 0.3% and a previous value of 0.5%. The CPI data was lower than expected, which alleviated market panic caused by last week's employment data to some extent, giving the volatile market a temporary breather.

Due to the significant drop last week and the favorable CPI data this week, U.S. stocks have temporarily turned around from deep declines, recovering some of the losses, but still show a downward trend for the week. The Nasdaq index remains below the 250-day line, with a weekly decline narrowed to 2.43%; the S&P 500 index has risen above the 250-day line; the Dow Jones index has dropped 3.07%, slightly rebounding to around the 250-day line.

On March 14, the University of Michigan announced that the preliminary value of the March Consumer Confidence Index was 57.9, significantly lower than the market expectation of 63.1 and a noticeable decline from the previous value of 64.7. At the same time, the preliminary expectation for the one-year inflation rate rose to 4.9%, exceeding the expected 4.2%, and also showing a significant increase from the previous value of 4.3%. This indicates that American consumers' concerns about the economic outlook are intensifying.

The decline in the Consumer Confidence Index reflects the impact of uncertainty in tariff policies on the confidence of end consumers. The pain for the market and business owners is that this policy uncertainty may require worse market feedback and a longer period of uncertainty to change.

On Friday, US stocks, European stocks, and even the Russian stock market experienced a significant rebound, mainly benefiting from news that progress has been made in the Russia-Ukraine conflict — both sides are expected to reach a 30-day ceasefire agreement.

There are views that some policymakers may achieve "economic recession" through government employee layoffs and tariff wars to pressure the Federal Reserve. Although this is just speculation, it seems that such an effect has indeed been produced based on the outcomes.

A more objective judgment may be that the essence of the current adjustment in the US stock market is a valuation adjustment triggered by expectations of interest rate cuts. The Shiller Price-Earnings Ratio (CAPE) of the S&P 500 Index reached a high of 37.80 times in December, close to the recent high of 38.71 times set in November 2021 after large-scale pandemic stimulus. This high valuation incorporates expectations of improved trade policies and the rapid development of the AI industry. Since 2023, the myth of AI growth has been shattered, and tariff policies and layoffs have crushed economic growth expectations, making it difficult for the market to maintain such high valuations, leading to a downward correction in search of a new balance.

Currently, the maximum declines of the Nasdaq, S&P 500, and Dow Jones indices have reached 14.59%, 10.36%, and 9.79%, respectively, all near the 250-day moving average, entering the "market correction" range (10%-20% decline). However, this does not mean that the market has completed the clearing process. Currently, the Schiller P/E ratio of the S&P 500 index is 34.75 times, down about 8.07% from the peak. According to historical patterns over the past 20 years, if it continues to decline, it may return to 32.89 times, indicating a further drop of more than 5%; if it returns to the mean of 27.25 times, there would still be more than 21% of retracement space. Of course, the probability of such a deep adjustment is extremely low, unless the decision-makers completely lose their sanity and let the U.S. economy truly fall into recession.

In the midst of market turmoil, risk aversion sentiment has driven gold prices to briefly surpass the $3000 per ounce mark. The dollar index has slightly rebounded after hitting a new low, the 2-year U.S. Treasury yield has risen by 0.7%, and the 10-year U.S. Treasury yield has increased by 0.37%, indicating that some funds are beginning to withdraw from U.S. Treasuries in preparation for bargain hunting in the stock market.

Overall, the U.S. stock market has entered an adjustment phase, but the inflation outlook and interest rate cut expectations remain unclear, especially with the effects of tariff policies and layoffs still lingering, which may cause the market to continue to correct downward to adjust to asset valuations in the current chaotic environment. Influenced by the correlation between Bitcoin spot ETFs and U.S. stocks, we maintain the judgment that Bitcoin will continue to be constrained by U.S. stock adjustments. Although Bitcoin has rebounded for several consecutive days and returned to around $83,000, it may still drop to $73,000 in the next two months.

Trends in Stablecoins and Bitcoin Spot ETFs

Compared to last week's net inflow of $1.282 billion through the dual channel, this week's supply inflow is $237 million, showing a significant decrease in inflow scale. Specifically, Bitcoin spot ETFs saw an outflow of $842 million, Ethereum spot ETFs had an outflow of $184 million, and stablecoins saw an inflow of $1.264 billion.

Although the inflow of stablecoins is decreasing and the outflow through ETF channels is increasing, the existing funds entering the exchange are being converted back into buying power, supporting Bitcoin's price to return to $83,000. Currently, there is a slight rebound in the existing funds on the exchange, which can be seen as a bottom-fishing behavior by a small amount of funds, but it is still not enough to become a force to drive a market reversal.

Selling Pressure and Sell-off Analysis

Data shows that last week, short-term investors continued to cut losses during the decline, with the largest loss occurring on March 13, but the scale was lower than on March 10.

In terms of floating profits and losses, short-term investors currently bear an average loss of about 9%, including a large number of ETF holders. In this round of decline, short-term investors are both a driving force and the main bearers of losses. In the subsequent market fluctuations, they will continue to be under pressure and may also become a source of selling pressure for further declines.

In the past three weeks of decline, the long-term investor group has shifted from reducing holdings to increasing them, adding approximately 100,000 coins of Bitcoin. Another large investor group worth noting has also increased its holdings by nearly 60,000 coins, with a cost below $80,000. In the long run, these two groups generally perform well and also play a role in stabilizing the market.

Cycle Indicator

According to market analysis tools, the Bitcoin cycle indicator is currently at 0.375, indicating that the market is in an upward continuation phase.