Waking up to find that the crypto market has bounced back unexpectedly, it seems somewhat unreasonable. Let's analyze the logic behind this and why? How long will the market's rebound last...


Why did negative news lead to a rebound:


First, let's review the major events that occurred yesterday: China imposed equivalent tariffs of 34% on all products originating from the U.S., which is a significant negative for the crypto market. At that time, BTC only dropped slightly in response. Subsequently, at 8:30 PM last night, the Federal Reserve announced non-farm payroll data that also exceeded expectations: 22.8. From a micro perspective, this could cause some small downward fluctuations; however, the crypto market remained surprisingly calm. Instead, there was a small rebound, with BTC rising to around 84,000, and as of today, BTC has averaged a 1% increase, currently hovering around 83,000. This indicates that when micro-level news meets macro-level events, it can backfire; after the negative news is fully digested, it turns positive. This saying has been applied by many for their psychological reassurance in the crypto market! The result is that market sentiment influences the news.


The fundamental reason why the trade war has not affected the crypto market these days is that U.S. tariff sanctions directly impact the U.S. stock market, which corresponds to traditional physical industries. If traditional physical industries are struggling, where will the funds go? The first choice is definitely to safe-haven assets like gold, and then to digital gold assets like BTC. Trump's aggressive actions have accelerated people's reassessment of Bitcoin's long-term value in investment portfolios, as the global order reset has significant medium-term impacts on the U.S. as a capital destination. Therefore, the more chaotic the world becomes, the better BTC performs. Thus, the short-term impact of the U.S. stock market on the crypto market is positive.


The decline remains the unchanged main route ahead:


It should be noted that this round of tariff increases is indeed different from the past and may be a turning point for currency sovereignty interactions. In the long run: maintaining the original view, the cryptocurrency market will still decline, and the rebound is a temporary strong support. Currently, cryptocurrencies cannot escape the attributes of risk assets. Once the U.S. stock market falls for a certain period, other stocks and safe-haven assets will rise, and funds will flee from the crypto market, continuing to shift to safe-haven and high-quality stock assets.
Another reason is: Federal Reserve Chairman Powell has made it clear today that he will not rush to respond to the comprehensive tariffs imposed by the Trump administration, nor will he react to financial market turmoil triggered by concerns over a global economic recession. This is because the Federal Reserve cares more about inflation expectations. Currently, after the U.S. has raised tariffs, domestic prices have naturally risen, leading to excessively high inflation, which is not a reason for the Federal Reserve to cut interest rates! The Federal Reserve is also betting on whether there will be room for negotiation in Trump's tariff policy. Returning to last night's non-farm payroll data, which exceeded expectations by 22.8, on the surface, the U.S. economy still looks strong, thus providing the Federal Reserve with a reason not to cut interest rates!


In summary: currently, the negative factors in the crypto market outweigh the positive ones. The Federal Reserve's delay in cutting interest rates leads to a lack of liquidity in the market, causing asset prices to naturally shrink. The international situation is unstable and unpredictable; we can refer to March 12, 2020, when the U.S. stock market experienced a circuit breaker, and BTC did not respond with an immediate decline but even rebounded. While everyone was cheering, crypto assets were halved, catching everyone off guard. The crypto market has still not succeeded; we must respect the risks, maintain sharp insight, and adjust investment strategies at any time. Still, the same message for everyone: we wait for a lower position to accumulate quality mainstream assets.


Saturday, April 5