In recent days, the crypto market and US stocks have both rebounded, with Bitcoin once surging to $88,765, the Nasdaq index rising by 2.8%, and the S&P 500 up 1.9%.
What exactly happened behind this wave of increase? Let's analyze it today.
First, let's look at the reasons for this wave of increase.
Simply put, this wave of increase is caused by big players buying up assets and the relaxation of policies.
There are reports that Trump may not impose tariffs on all countries, meaning that a trade war will not fully break out.
Previously, the market was quite scared, worrying that Trump's tariffs would lead the US economy into recession, causing a crash in US stocks.
Looking at it now, it may not be that serious, and everyone is relieved.
The fear-greed index has climbed from a low point to 34, nearing neutrality, indicating an improvement in market sentiment.
Investors are no longer hesitant to spend their money; funds are beginning to flow into risk assets like US stocks and Bitcoin.
Another reason for the market's rise is that big players are bottom-fishing.
MicroStrategy has spent another $584 million to buy 6,911 BTC at an average price of $84,529; their stock price has also risen by 10% in the past few days.
US game retailer GameStop officially announced that the board has unanimously approved a Bitcoin investment plan, preparing to use $4.8 billion in cash reserves or issue bonds to purchase Bitcoin and stablecoins.
On March 24, Bitcoin spot ETF had a net inflow of $84.1736 million, with seven consecutive days of net inflow, indicating that institutions are clearly increasing their positions.
The global cryptocurrency market's trading volume also surged to $52.02 billion in 24 hours, indicating that real money is coming back.
However, don't celebrate too early; there are still uncertainties in the short term.
On March 24, Mt. Gox transferred 10,608 Bitcoins to a new address, worth $927 million.
If they start to sell off, it will create some selling pressure on the market, and Bitcoin may drop by 5-10% in the short term.
Additionally, on March 28, $11.9 billion worth of BTC options will expire, with the maximum pain point at $85,000.
What is called the 'maximum pain point'? It is the point where the majority is most likely to push the price down, causing both options buyers and sellers to lose roughly the same amount.
Historical data shows that options expiring in December 2024 previously led to an 8% drop in BTC, and short-term price fluctuations may increase.
How will the market move next?
Whether the market can continue to rise crucially depends on the strength of Trump's policies.
His policies have dual aspects:
Loose (bullish for the market): tax cuts, deregulation, and interest rate cuts.
Tight (bearish for the market): raising tariffs, utilizing Musk's government efficiency departments, and cutting government spending, which would scare off investors.
The previous term (2017-2021): loose first then tight, Trump first cut taxes to stimulate the market and then waged a trade war, causing public anxiety.
This term (starting in 2025): conversely, tight first and loose later; he began by pushing for efficiency reforms, cutting expenditures, and even threatened to raise tariffs comprehensively.
However, the favorable policies of tax cuts and deregulation are still going through processes and have not yet been implemented.
However, a recent correction signal has emerged; Trump said that the reforms from the end of January to the end of February were too aggressive and controversial.
At the beginning of March, he said he would use a 'scalpel' instead of a 'big knife', meaning to ease up a bit and not be too harsh.
Thus, Trump is also watching market reactions and public opinion, and might not be as aggressive moving forward.
Bitcoin's trajectory primarily depends on the direction of Trump's policies:
If Trump's policies ease and tariffs are not raised too aggressively (most countries have low tariffs while only a few have high ones), and other countries do not retaliate fiercely, market sentiment will stabilize.
If March inflation (CPI) is not high, the darkest moment for the market will have passed, and US stocks and BTC will gradually warm up.
If Trump gets serious and a tariff war fully breaks out, with other countries retaliating, inflation soaring, and the Fed hesitant to cut rates, the market will experience significant fluctuations, and US stocks and BTC may first drop.
So, Trump is the biggest uncertainty; we must be cautious of his fluctuating tariff policies.
To prevent a significant drop in US stocks from dragging BTC down, I have kept some capital ready to pick up low-priced assets during extreme market fluctuations.
Why is Bitcoin so attractive?
Because the dollar has lost value: since 2000, the dollar has depreciated by over 363%. If your savings do not keep up with this pace, it means you are becoming poorer every year. Currently, Bitcoin has become a key tool to combat inflation.
Corporate FOMO (fear of missing out): two years ago, only 33 listed companies dared to buy BTC, now over 80 are hoarding it, and corporate FOMO sentiment is rising, with everyone fearing to fall behind.
Whales are bullish: the founder of MicroStrategy stated that recently large holders have been buying feverishly, and they are very optimistic about Bitcoin's long-term performance.
Summary
This wave of increase is brought about by big players buying assets and the relaxation of policies, leading to a warming of market sentiment.
However, the uncertainty from Mt. Gox's sell-off and Trump's policies still exists, and the market could change at any time.
It is advisable to keep at least 20% of your capital as a buffer against potential black swan events.
