Crypto Market Weekly Report: Economic Data Exceeds Expectations, Adjustment Reasons Remain Unresolved, Caution Still Needed in the Short Term

This week, Bitcoin opened at $80,708.21 and closed at $82,562.57, with a weekly increase of 2.31%, a volatility of 10.86%, and a continued decrease in trading volume compared to last week. The price of Bitcoin is operating within a descending channel, with a slight rebound.

The CPI data released by the United States was slightly higher than expected, and there are signs of easing in the Russia-Ukraine conflict, providing a brief respite for the US stock market and the bitcoin market. However, the valuation of the US stock market is still in a downtrend stage, and historical data shows that there is still room for further decline. The fundamental reason driving the decline in valuations—the chaotic tariff policy that may trigger inflation—has not eliminated concerns about the US economy falling into "stagflation." The longer this uncertainty and deadlock lasts, the greater the potential for valuation adjustments. This is also the reason why we hold a cautious attitude towards the short-term rebound of bitcoin.

Macroeconomic Data

This week, the United States released the CPI data for February, with the unadjusted CPI increasing by 2.8% year-on-year, slightly lower than the expected 2.9%; the seasonally adjusted CPI rose by 0.2% month-on-month, below the expected 0.3%. This data eased the panic caused by last week's employment figures, providing a brief respite for the market.

Under the dual influence of a significant decline last week and favorable CPI data this week, the US stock market has temporarily stabilized from deep declines, recovering some of its losses, but still shows 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 has risen above the 250-day line; the Dow Jones index has dropped by 3.07%, barely returning to near the 250-day line.

On March 14, the University of Michigan released the preliminary consumer confidence index, which fell to 57.9, far below the market expectation of 63.1 and significantly lower than the previous value of 64.7. At the same time, the one-year inflation rate expectation preliminary value rose to 4.9%, exceeding the expected 4.2%. This indicates that American consumers' concerns about the economic outlook have intensified.

On Friday, global stock markets generally rebounded, mainly due to signs of easing in the Russia-Ukraine conflict, as both sides aim to reach a 30-day ceasefire agreement.

Market Valuation Analysis

Currently, the maximum declines of the S&P 500, Nasdaq, and Dow Jones indexes have reached 10.36%, 14.59%, and 9.79%, respectively, all entering the "market correction" range (10%-20% decline). However, this does not mean that the market has completed its clearing. The current Shiller CAPE ratio of the S&P 500 is 34.75 times, down approximately 8.07% from its peak. According to historical patterns over the past 20 years, if it continues to drop to 32.89 times, it will decline by more than 5%; if it falls back to the mean of 27.25 times, there is still more than a 21% drawdown space.

Amid market turbulence, risk aversion sentiment has driven gold prices to briefly break through $3000 per ounce. The dollar index has seen a slight rebound after hitting a new low, while the yields on 2-year and 10-year U.S. Treasuries rose by 0.7% and 0.37% respectively, indicating that some funds are starting to withdraw from U.S. Treasuries to buy into the stock market.

Crypto Market

This week, the net inflow of funds in the crypto market's dual channel was $237 million, a significant decrease from $1.282 billion last week. Specifically, Bitcoin spot ETF saw a net outflow of $842 million, Ethereum spot ETF had a net outflow of $184 million, while stablecoins recorded a net inflow of $1.264 billion.

Despite the decrease in inflow of stablecoins and the increase in outflow from ETFs, the existing funds entering exchanges have translated into buying pressure, supporting Bitcoin's price to return to $83,000. Currently, the existing funds in exchanges have shown a slight rebound, but this rebound may only be a bottom-fishing behavior of a small amount of funds, which is still insufficient to drive an overall market reversal.

Short-term investors are currently bearing an average loss of 9%, which includes a large number of ETF holders. In this round of declines, short-term investors are both a triggering force and the main bearers of losses. In the turbulent market ahead, they may continue to face pressure and could become a source of selling pressure for further declines.

Long-term holders have shifted from reducing their holdings to increasing them during the recent 3-week decline, accumulating about 100,000 bitcoins. Another noteworthy group of whales has also increased their holdings by nearly 60,000 coins, with a cost below $80,000. In the long run, these two types of investors typically perform well and act as stabilizers in the market.

According to the market cycle indicator, the current EMC BTC Cycle Metrics indicator is 0.375, indicating that the market is in a rising consolidation phase. However, given the uncertainties in the macroeconomic environment, investors should remain cautious and closely monitor market changes.