Crypto Market Weekly Report: Economic data exceeds expectations, boosting the market, but long-term adjustment factors still exist.

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 decline in trading volume compared to last week. The price of Bitcoin is operating within a downward 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. These factors 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 a downward probing phase, and historical data shows there is still room for decline. The fundamental reason driving the decline in valuation—the chaotic tariff policy that may trigger inflation, thereby raising concerns about the U.S. economy falling into "stagflation"—has not yet been eliminated. The uncertainty of policies and the ambiguity of the economic outlook make the worries about "stagflation" difficult to dissipate; the longer it lasts, the greater the room for valuation adjustments. This is why we are cautious about a rebound in Bitcoin in the short term.

Interpretation of Macroeconomic Data

This week, the United States released the February CPI data. The unadjusted CPI increased by 2.8% year-on-year, 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 market panic caused by last week's employment figures, providing a brief respite for the market.

As a result, the US stock market has seen a slight rebound, but overall it is still in a downward trend. The Nasdaq index remains below the 250-day line, with the weekly decline narrowing to 2.43%; the S&P 500 index has risen above the 250-day line; the Dow Jones index has fallen by 3.07%, approaching the 250-day line.

The preliminary consumer confidence index for March released by the University of Michigan in the United States is 57.9, significantly lower than the market expectation of 63.1 and down from the previous value of 64.7. At the same time, the preliminary one-year inflation rate expectation has risen to 4.9%, higher than the expected 4.2%. This indicates an increase in concerns among American consumers regarding the economic outlook.

On Friday, global stock markets generally rebounded, mainly benefiting from news that the Russia-Ukraine conflict is expected to ease, with both sides planning to reach a 30-day ceasefire agreement.

Market Valuation Analysis

The essence of the current adjustment in the US stock market is the valuation adjustment amid interest rate cut expectations. The Shiller P/E ratio (CAPE) of the S&P 500 reached a peak of 37.80 times in December, close to the near-high of 38.71 times set in November 2021. This high valuation incorporates expectations of improved trade policies and rapid development in the AI industry. However, recent setbacks in AI growth expectations, combined with tariff policies and layoffs impacting economic growth forecasts, have made it difficult for the market to maintain such high valuations, prompting a downward search for 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 entering the "market correction" range (10%-20% decline). The Shiller price-to-earnings ratio of the S&P 500 index is currently at 34.75 times, down 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 returns to the mean of 27.25 times, there will still be more than 21% of retracement space.

Amid market turbulence, risk aversion sentiment has driven gold prices to briefly break through $3000/ounce. The US dollar index has slightly rebounded after hitting a recent low, with the 2-year US Treasury yield rising by 0.7% and the 10-year US Treasury yield increasing by 0.37%, indicating that some funds are beginning to withdraw from US Treasuries and move towards bottom-fishing the stock market.

Crypto Market Dynamics

This week, the flow of funds in the crypto market showed a two-way trend. Bitcoin spot ETFs had a net outflow of $842 million, Ethereum spot ETFs saw a net outflow of $184 million, while stablecoins had a net inflow of $1.264 billion. Despite the outflows from ETFs, existing funds entering exchanges transformed into buying power, supporting Bitcoin's price to return to around $83,000.

The short-term investor group is currently bearing an average loss of 9%, which includes a large number of ETF holders. These investors are both the driving force behind this round of decline and the main bearers of losses, and they may continue to face pressure in the future.

Long-term holders have shifted from selling to buying during the recent three-week decline, accumulating about 100,000 bitcoins. Large investors (whales) have also increased their holdings by nearly 60,000 bitcoins, with costs below $80,000. These two groups often perform well in the long-term market and act as stabilizers for the market.

According to the market cycle indicator EMC BTC Cycle Metrics, the current value is 0.375, indicating that the market is in an upward continuation phase.

Overall, although recent economic data has shown slight improvement, the fundamental factors driving market adjustments have not been eliminated. In the next two months, Bitcoin may still dip to around $73,000. Investors should closely monitor macroeconomic data, policy trends, and institutional capital flows, responding cautiously to market fluctuations.