Forward-looking trading dominates the market: over $10 billion inflow, BTC strong rebound

In the March report, we pointed out "The movement of the Dao is in the opposite direction" and noted that "the panic selling has been released to the greatest extent," and "Q2 will welcome a rebound market." Ultimately, in April, BTC experienced a strong rebound, rising 14.11% in a single month, recovering all previous losses.

The tariff dispute that has dominated the trends of the global financial market officially began in April, causing a fierce impact on the market, with panic sentiment soaring and asset prices significantly adjusted downward. However, after the release of emotions, accompanied by a "softening" of policy positions and the publication of relatively resilient U.S. economic and employment data, funds rushed into the U.S. stock and cryptocurrency markets.

BTC adjusted ahead of U.S. stocks, and after U.S. stocks completed their bottoming out, it surged under the drive of billions in capital. More importantly, after more than two months of adjustment, the chip structure has greatly improved, and the internal state is more stable.

The S&P 500 and the cryptocurrency market have fully recovered all the declines since the tariff dispute. Despite the unresolved trade friction and uncertainty over whether the U.S. economy will enter a recession, the market is performing very strongly, continuously pricing in various latest information. However, for the market to achieve a reversal, it still needs the trade friction to enter the third phase (reaching an agreement) and confirmation of U.S. economic data. In the meantime, there will likely be many twists and turns.

Macroeconomics: Expectation Trading Triggers Severe Market Revisions

In the March report, we mentioned that "the new trading judgment framework was initially established at the end of February, and throughout March, the output based on various continuously released economic, employment, and interest rate data was conducted within this judgment framework." April continued to evolve on this basis, where the policy stance's expression and actions regarding trade friction played a major role in its "softening." Coupled with the relatively strong performance of economic and employment data released in April, traders weakened their concerns about an "economic recession," and ultimately, after the monthly revision trend concluded, forward-looking trades betting that trade friction would not lead to an economic recession dominated market movements. The Nasdaq and BTC both recorded positive monthly returns after initially falling and then rising.

In early April, the escalation of trade frictions led to a panic sell-off in U.S. stocks, with all three major indices falling below their annual lines. Overvalued tech stocks were hit hard. Both short- and long-term U.S. Treasury bonds fell sharply, as traders sold stocks to move into the bond market and European stocks. Over the weekend, large-scale protests occurred across the United States.

On Monday, April 7, the S&P 500 VIX index broke 60. The market sell-off entered its second phase, with a large sell-off of U.S. Treasuries. On the 9th, new tariffs were officially implemented, and the 2-year U.S. Treasury yield rose above 4%. On the 11th, the 10-year U.S. Treasury yield approached 4.6%. On the 21st, the sell-off spread to the currency market, with the U.S. dollar index falling to 97.911, surpassing last year's low during the Carry Trade collapse. The Nasdaq entered a technical bear market.

The unexpected trade policies, indifference to the decline in financial markets, and the Chinese government's strong counterattack have led to a brutal "triple kill" situation in the US stock, bond, and currency markets. This has triggered greater panic in the market, with criticism and protests from businesses and the financial sector rising to a boiling point, shaking the fundamental confidence of the market and forcing policymakers to make concessions.

First, suspend tariffs for 90 days on all countries except China to ease tensions with allies and gain more negotiation time. On April 23, reports emerged that the government might significantly reduce the high tariffs on Chinese goods, possibly by more than half, to ease tensions with China.

Gold has become the only winner, experiencing a strong rise since the 9th, climbing from $2970/ounce to a high of $3499.93 (April 22). However, since the 23rd, news that the government is considering reducing high tariffs on Chinese goods has led to a continuous adjustment, dropping to $3288.54/ounce by the end of the month. Nevertheless, it still recorded a significant increase of 5.08% for the month.

U.S. stocks temporarily bottomed out on April 4 and rebounded strongly; after the policy "softening" on the 23rd, the rebound continued. By the time this report was completed (May 2), the NASDAQ and S&P 500 had completely regained the losses caused by trade frictions.

Looking at the whole month, the Nasdaq rose 0.85% in April, the S&P 500 fell 0.76%, the Dow Jones fell 3.17%, and BTC surged 14.11%.

During this process, although the market once bet that the Federal Reserve would initiate a temporary interest rate cut and expected the probability of a rate cut in May to exceed 80%, the Federal Reserve has maintained a tough stance, only reiterating during the "triple kill" of stocks, bonds, and currencies that it would intervene in the market if there were unexpected developments in the job market, releasing some "dovish" signals.

On April 10, the U.S. Bureau of Labor Statistics released data showing that due to falling energy prices, the March CPI (Consumer Price Index) decreased by 0.1% month-on-month (seasonally adjusted), marking the first monthly decline in nearly five years and falling short of the market expectation of a 0.1% increase. The annualized CPI growth rate dropped from 2.8% in February to 2.4% (not seasonally adjusted). The core CPI (excluding food and energy) increased by 0.1% month-on-month (below the expected 0.2%), with an annualized growth of 2.8%, the lowest since March 2021.

On April 30, the U.S. Bureau of Economic Analysis released its preliminary estimate for the first quarter, showing that the annualized quarterly real GDP decreased by 0.3%, the lowest level since the second quarter of 2022. This is significantly below the projected growth rate of 2.4% for the fourth quarter of 2024 and also lower than market expectations of 0.4% (Dow Jones consensus forecast) or 0.3% (median from Wall Street Journal survey on April 12).

On May 2, the Bureau of Labor Statistics (BLS) released the non-farm payroll report for April, which showed an increase of 177,000 non-farm jobs, exceeding the Dow Jones expectation of 133,000 but lower than the revised 185,000 for March (with February and March data revised down by 58,000). Over the past six months, the average monthly job addition has been 193,000, indicating that the labor market remains resilient. The unemployment rate for April held steady at 4.187% (compared to 4.152% in March), meeting expectations, while the labor force participation rate saw a slight increase, suggesting that the market is relatively robust. Average hourly earnings increased by 0.2% month-over-month (below the expected 0.3%), and year-over-year growth was 3.8% (below the expected 3.9%), indicating moderate wage pressure.

Inflation data has shown signs of cooling, while employment data remains strong. This has temporarily alleviated market concerns about an economic recession. Coupled with the "softening" of policies, despite the ongoing trade friction still at the second stage ("negotiation"), funds from retail investors and active funds initiated forward-looking trades, significantly buying in and driving a strong rebound in the US stock market.

We believe that the panic triggered by the medium and short-term trade frictions has been relatively fully released, and the GDP data indicates that at least for now, the U.S. economy has not suffered significant damage. Additionally, policymakers seem to be returning from "out of control" to "rationality", which is why forward-looking funds dare to invest heavily. We tend to see the adjustment from February to April as a sharp correction of the overvalued U.S. stock market that has been rising for two years under the impact of trade frictions, a technical probe into the bear market, but there is still no sufficient data to indicate that the U.S. economy will enter a recession. Currently, the valuation of U.S. stocks has seen a certain decline, but they are still not cheap, and the market pricing has been relatively full. If it continues to rise, more supportive conditions are needed, such as further easing of trade frictions and a further decrease in the CPI. The outlook for interest rate cuts is not optimistic; CME FedWatch shows that the market's expectations for rate cuts have been postponed until July. After a significant rebound, we tend to have a neutral judgment and need to closely monitor the progress of trade frictions and economic data. If a trend of economic deterioration appears, it may lead to another downward revision.

Crypto Assets: Solid Chip Structure + Long-term

At the beginning of the month, there was a collapse-style decline, but by the end of the month, there was a significant rebound. The BTC trend in April is a model of "reverse trading," where one buys during fear and waits for the situation to ease, leading to a rapid rebound in asset prices.

In April, BTC opened at 82534.31 USD, dropped to a low of 74420.69 USD, and closed at 94182.54 USD, resulting in a monthly increase of 14.11%, or 11648.22 USD, with a maximum monthly volatility of 26.12%.

The trend for the entire month showed a decline followed by a rise, with the lowest point occurring on April 7, "Black Monday". After the new tariffs were officially implemented, it rebounded and gradually increased. Calculating the daily fluctuations, the number of rising days in the 30 trading days far exceeded the number of falling days.

Technically, BTC has confirmed the long-term trend by rebounding three times to the annual line amid the sharp decline of the US stock market, and on April 22, it surged 6.82%, strongly breaking through the 200-day line, returning to the "policy bottom" (the range structure formed after the new policy) and approaching the "first ascending trend line" of this bull market.

Compared to the US stock market, BTC's performance is very strong, thanks to the price correction that began in March, the accumulation by long-term holders and large investors, as well as favorable support in terms of policy and use cases.

Since the government signed the executive order in March to establish a "Strategic Bitcoin Reserve," multiple states in the U.S. have continued to advance their respective "Bitcoin Reserve Bills." On April 30, a certain state's House of Representatives passed two Bitcoin Reserve Bills, which are currently awaiting the governor's signature. If the bills go into effect, that state will become the first in the U.S. to allow state finances to hold Bitcoin. Once the state bill is officially enacted, it is believed that the progress in other states will also accelerate.

The expansion of BTC use cases and the rise in price are in a continuous feedback process that mutually reinforces each other. In March-April, the global financial market turmoil triggered by trade frictions and the subsequent revisions temporarily interrupted this process. However, the holding structure and market movements within the cryptocurrency market remain intact and stable. Once the panic subsides, BTC will regain its upward momentum. In the future, with potential turbulence from trade frictions and macroeconomic factors, BTC prices will still experience fluctuations, and breaking through previous highs will depend on the resolution of trade frictions and whether the U.S. economy avoids falling into recession.

Chip Structure: Long Hands, Shark Accumulation, Long-term Buyers Sweeping Up

On October 4, 2024, as funds surged into the market, the long-hand group initiated the second wave of selling in this cycle. The strong inflow of funds continued to push prices close to $110,000 after absorbing the selling pressure.

After entering March, accompanied by the loss of liquidity, the price of BTC has significantly dropped. Subsequently, the long-hand group once again played the role of a "stabilizer," shifting from selling to increasing holdings.

In addition, one of the large holders with a holding between 100 and 1000 BTC, known as "sharks," has continued to increase their holdings during the decline, accelerating their purchasing in late April, with a total increase of over 80,000 BTC throughout the month, becoming a key force in reversing the trend. It is noteworthy that this group is also a major buyer of BTC in the price range of $70,000 to $100,000 during the period from October to December 2024. Based on the fact that the purchasing scale of this group in this cycle far exceeds the selling scale, it can be judged that the behavior of this group aligns with the characteristics of long-term investors, and their recognition of this price range contributes to price stability.

After buyers from all parties swept the market, the exchange's BTC supply decreased by about 60,000 coins in April.

In late February, the price began to decline, and by the end of April, the price returned to the levels seen in late February. Accompanied by market fluctuations and ample chip exchange, comparing the chip distribution from January 31 to April 30, it can be observed that the focus of chips in the range of $74,000 to $100,000 has significantly shifted downward, with some chips priced above $100,000 moving down to the $74,000 to $94,000 range.

The market turbulence over the past two months, from the perspective of chip distribution, indicates that the FOMO new entry chips were forced to sell during the sharp decline, while the chip shortage in the 7.4-9.4 range has been replenished. According to a certain data platform, the short positions have now exited the floating loss, while the BTC in a floating loss across the entire chain has also dropped to 14%. The market selling pressure caused by panic and losses has greatly improved.

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