Have we reached a point of optimism in the short term?
Bitcoin's recent performance has indeed been stronger than U.S. stocks, and the cryptocurrency market has also seen a rebound. Many people have asked me whether this is a reversal or a rebound.
How would I know? I've always felt that the effort to guess every short-term trend is mostly futile. Just like I didn't predict that the good market in December would come to an abrupt halt; at that time, I didn't foresee the trend reversal. Now, trying to figure out whether this is a rebound or a reversal is quite challenging, especially if it's a rebound and I'm trying to determine where it might stop. I'm not a technical analysis master, so naturally, I don't have that level.
From the perspective of fundamentals, the recent market improvement is understandable. Bitcoin is only 20% away from its new high, and it has indeed been very strong. The decline is no longer 1.5X leverage of the Nasdaq; the rebound is even more vigorous than the Nasdaq. Non-Bitcoin cryptocurrencies are like a 2X leverage of the Nasdaq. The fact that Bitcoin has decoupled from U.S. stocks for several days recently is not hard to understand; this has happened before. Bitcoin is indeed a risk asset, but it's also a safe-haven asset. More often, it is a risk asset, but it won't always follow U.S. stocks because its logic is indeed different, and they are not the same thing. Once the risk attributes become apparent, the safe-haven attributes will prevail. There will always be times when decoupling occurs; it's just that in recent years, due to the institutionalization process, it has been closely related to U.S. stocks, but looking at it in a longer timeframe, it will still have its own rhythm.
This is from the perspective of risk aversion. Furthermore, U.S. stocks have also risen; although not by much, cryptocurrencies have rebounded significantly. This is a characteristic of cryptocurrencies: they tend to drop more than U.S. stocks during downturns and rise faster during recoveries. Especially over the past few years, Bitcoin has dropped slightly more than U.S. stocks during declines, but has surged much more dramatically during recoveries. In the long term, from September 2023 to now, the increase has been significantly higher than that of the Nasdaq. Non-Bitcoin cryptocurrencies are lagging behind, more related to their own development.
The rise in U.S. stocks is related to tariffs. Trump's attitude has softened slightly on the tariff issue, which has given people a glimmer of hope, hinting at a reduction in tariffs on China. Additionally, Trump stated that he would not fire Powell, which has relieved the already struggling dollar, boosting the 'risk appetite' sentiment. The prices of Bitcoin and other cryptocurrencies have followed suit, with BTC surging 10% in the past two days and only experiencing a minor pullback today.
However, this matter cannot just be viewed at face value. Trump said he wants to talk to China, but there isn't any sincerity; the Chinese Foreign Ministry has already stated that there are fundamentally no negotiations between the two sides. So it's just that Trump's attitude has changed, but everyone knows how quickly his attitude can shift, so it's not wise to be overly optimistic. In short, the economic fundamentals haven't changed much; there are still a chaotic bunch of uncertainties hovering around. No one knows what the final structure of tariffs will look like; they say they want to reduce tariffs on China by at least half, but that would still be quite high. China will certainly not be satisfied with tariffs around 50%; if it only goes down to 50%, it's likely that discussions will break down.
Negotiations with other countries are likely to drag on for a long time; we have to question the stability of the global economy. In order to protect profits, companies will likely have to cut costs, and employee wages and capital expenditures are usually the easiest targets. In the long term, this is certainly not good news for economic growth. Additionally, with interest rates still quite high, if investors panic, they may sell off first, adding pressure to the market. Therefore, while this rebound in the cryptocurrency market looks lively, it feels like just a short-term cheer; if it wants to continue, its foundation doesn't seem very solid.
In the long run, economic indicators and policy trends are the main focus; relying solely on this softened attitude won't sustain any significant market movements. If you expect this to be the sole driver, you might need to be cautious.
In recent times, my mindset needs to be more calm and not too aggressive. If there are still bullets left, then buy slowly. If I'm suffering from being fully invested, then I should motivate myself a bit more. If I can save up some money, then that's great; I should make good profits and save up more bullets. Buy more when prices are low, and don’t let FOMO take over when prices rise; there's no need for that. Don’t keep scaring yourself thinking this is about to reverse. It won't all die out in one night, nor will it take off in a single day. With so many unresolved issues, how could funds dare to charge ahead without waiting for the dust to settle?
Let's wait until the tariff negotiations, monetary policy, regulatory policies, and the potential for recession are almost settled before discussing the possibility of a reversal. I feel that it won't be possible for these issues to be resolved in the next two to three months. Adjust your mindset; engage in regular investment if you can, manage your positions, and grid trade if necessary.