Crypto Market Weekly Report: Economic Data Better Than Expected, But Adjustment Factors Still Exist

This week, the price of Bitcoin rose from $80,708 to $82,562, an increase of 2.31% for the week, with a volatility of 10.86%. The trading volume continued to decline from last week, and the price is operating within a downward channel, showing a slight rebound.

The United States announced CPI data slightly above expectations, and there are also signs of easing in the Russia-Ukraine conflict, allowing for a brief respite in the US stock and Bitcoin markets. However, US valuations are still in a downtrend, and historical data indicates there is still room for decline. The core factor driving the valuation drop—the tariff policy, which could trigger inflation, raising concerns that the US economy may fall into "stagflation"—has not yet been alleviated. The longer this uncertainty and stalemate lasts, the greater the potential for downward adjustments in valuations. This is also the reason for our cautious attitude towards a Bitcoin rebound in the short term.

Macroeconomic Data

The latest CPI data from the United States shows that the unadjusted CPI in February rose by 2.8% year-on-year, slightly lower than the expected 2.9%; the seasonally adjusted CPI rose by 0.2% month-on-month, lower than the expected 0.3%. This data has eased the panic caused by last week’s employment figures, providing the market with a temporary sigh of relief.

Under this influence, the US stock market turned from a deep decline to a modest rebound, but still showed a downward trend for the week. The Nasdaq index remains below the 250-day line, with a weekly decline narrowing to 2.43%; the S&P 500 index rebounded above the 250-day line; the Dow Jones index fell by 3.07%, barely holding above the 250-day line.

The preliminary consumer confidence index for March at the University of Michigan has significantly dropped to 57.9, far below the expected 63.1. At the same time, the one-year inflation expectation has risen to 4.9%, higher than the expected 4.2%. This indicates that American consumers are increasingly worried about the economic outlook.

On Friday, global stock markets generally rebounded, mainly benefiting from news that both Russia and Ukraine plan to reach a 30-day ceasefire agreement.

From a longer-term perspective, the current adjustment in the US stock market is essentially a valuation correction within the interest rate cut cycle. The S&P 500 Shiller CAPE ratio has dropped by 8.07% from a high of 37.80 times in December last year to 34.75 times, but if it returns to the 20-year average of 27.25 times, there is still more than a 21% downside potential. However, the likelihood of such a deep adjustment is low unless the US economy truly falls into recession.

Against this backdrop, risk aversion sentiment has driven gold prices to briefly break through $3000/oz. The dollar index has risen slightly, and US Treasury yields have increased slightly, indicating that some funds are starting to withdraw from US Treasuries and move towards the stock market.

Overall, the US stock market has entered a correction phase, but the outlook for inflation and interest rate cuts remains unclear. We believe that the price of Bitcoin will still be constrained by the adjustments in the US stock market and may drop to around $73,000 in the next two months.

Capital Flow Analysis

This week, the total inflow of funds in the crypto market amounted to $237 million, a significant decrease from $1.282 billion last week. Specifically, Bitcoin spot ETFs had a net outflow of $842 million, Ethereum spot ETFs had a net outflow of $184 million, while stablecoins saw a net inflow of $1.264 billion.

Despite the increase in ETF fund outflows, the existing funds entering the exchanges are converting into buying pressure, supporting the Bitcoin price to return to around $83,000. However, the current stock of funds on the exchanges has only seen a slight rebound, which seems more like a bottom-fishing behavior with a small amount of funds, and is not enough to drive a full market reversal.

Investor Behavior Analysis

Short-term investors continue to cut losses during this round of decline, averaging about 9% in losses. This group of investors is both the driving force behind the decline and the main bearers of the losses, and they may continue to face pressure in the future.

In contrast, long-term holders have shifted from selling to accumulating over the past three weeks, adding approximately 100,000 bitcoins. Large investors (whales) have also increased their holdings by nearly 60,000 coins, with costs under 80,000 dollars. Both types of investors tend to perform well in the long run while also playing a role in stabilizing the market.

Cycle Indicator

According to market analysis tools, the current Bitcoin cycle indicator is 0.375, in the rising relay stage.