Under the impact of the deadly "tariff drug," how to interpret the cryptocurrency market? | Trader's Observation

Author: shushu, BlockBeats

Today's financial market situation can be described as universally cold and hot. Whether it's the "taking medicine" meme or the "golden pit," participants in the stock market and cryptocurrency circles are witnessing the onset of a chaotic era that has already begun.

Related reading: "Global stock markets face the worst three-day performance in 50 years, can the crypto market hold up?"

The Federal Reserve hesitates to cut interest rates, and the market speculates that it has lost its "support" ability, while Trump tears apart market confidence with tariff games, exacerbating external uncertainties. Meanwhile, the crypto market continues to decline under the dual pressure of technical and emotional factors, with several key support levels in jeopardy. This article explores the current market observations of traders from multiple dimensions including macro, policy, market data, and technical analysis for readers' reference.

Macro Analysis

@AnnaEconomist

One reason I believe this round of selling still has room to go down is the lack of possibility for "Federal Reserve support" or "Trump support." The following explains why "Federal Reserve support" has become difficult to achieve:

1. The premise of this market decline assumes that the Federal Reserve will cut rates five times this year. However, all FOMC members have stated that they need to see more "certainty" before cutting rates again. Even by June, the Federal Reserve may not get enough "clear" inflation guidance. If companies continue to stockpile until June (which I believe they will), even if broader price increases eventually occur, they will only manifest in the second half of the year. The Federal Reserve must wait for clearer inflation signals.

2. The issue also lies in the Federal Reserve's own expectations and judgments. If they still view the current situation as similar to 2022, fearing that inflation expectations may "de-anchor," then even if the stock market drops another 20%, it won't shake their stance (as was the case in 2022). Based on the Federal Reserve's assessment of inflation risks from the March meeting, they indeed still consider the current situation as another 2022.

3. The Federal Reserve will also reference inflation forecasts from major Wall Street investment banks. Several large banks have already predicted that core PCE will rise to 4%-5%. These forecasts will further diminish their willingness to cut rates.

4. The Federal Reserve places more importance on "hard data." For example, news of DOGE layoffs may not reflect in non-farm data until the end of the third quarter or the fourth quarter. However, rising inflation data is easier and quicker to manifest. In other words, the Federal Reserve itself is a lagging regulator.

5. Powell cares about his "historical positioning." He wants to be seen as the new generation's Volcker. At the same time, he is carefully maintaining the independence of the Federal Reserve, so he keeps his rhetoric neutral to avoid angering the White House. I say "attempting" because if you listen closely, you'll find that he is deliberately downplaying the hawkish stance within the FOMC and the Federal Reserve's staff system.

6. During the recessions of the 1970s and 1980s, nominal long-term interest rates only bottomed out when the economy hit rock bottom. In other cycles, rates often bottomed out earlier. The current macro environment resembles the 70s and 80s rather than other milder recessions.

@Cato_CryptoM

1. The final version of Trump's reciprocal tariffs is on the 9th, so before the 9th, it's more of a negotiation period. At this time, defining the overall scope of these tariffs and their impact on the economy is premature, and we shouldn't rush to define whether Trump will be impeached.

2. The core of Trump's high tariffs is to have leverage and initiative at the negotiating table, so it doesn't necessarily mean he has to actually raise tariffs that much to self-destruct or ruin his approval ratings.

3. Harming a thousand enemies while injuring oneself by eight hundred, the ones suffering are not Trump or MAGA, but the old money in America, namely the dollar capital group. Therefore, they are anxious and have pushed for nationwide protests to coerce Trump into compromise.

But who told you that Trump must impose these tariffs and that they must be this high? If the negotiation objectives are achieved during this period, wouldn't Trump suggest lowering the tariff increase?

If we look at it from a god's perspective, Trump's seemingly outrageous and even hasty reciprocal tariffs make the whole world think he is crazy or foolish. This could be an opportunity to complete negotiations at the table, internally stimulating opponents to rally public opinion to coerce him, exposing all hidden enemies, and then announcing a reasonable tariff policy on the 9th. Isn't that killing multiple birds with one stone?

Of course, this perspective still needs to wait for the results on the 9th.

4. Trump's impact on the current market basically aligns with our expectations. During the previous election period, I wonder if my friends remember that we mentioned there would be a "pain period" when Trump took office, and indeed we are currently experiencing that pain.

However, what exceeded our expectations is that no one anticipated the "pain" to be this strong, to the point where we think he is insane.

Of course, our criticism of Trump now is simply because we are victims of risk assets, the injured party in Trump's "revolution." But if we change our perspective, those who understand history should know that revolutions and reforms in various countries historically require a period of pain, and these initial revolutions and reforms were often misunderstood and faced "national righteousness" coercion from protests.

What we see in historical results is only the success of the revolution, not the pain they endured. I believe what Trump is doing now is similar.

Many people think Trump wants to crash the economy, but if we look at it from another angle, even if Trump is currently artificially creating a recession, if the economy quickly recovers after the recession and shows enough vitality, then who still cares about the current pain?

History is always written for the victors, and Trump has clearly not won yet, so we shouldn't rush to conclusions.

Of course, we originally thought Trump was performing a "major surgery" on America, but it turned out to be "bone scraping," so the pain is too intense. However, if we find a year later that he successfully extended America's life by 50 years, I guess everyone will be shouting that Trump is "great."

5. Regarding the pressure tariffs bring to inflation, Powell has previously stated that we need to see whether the inflation transmission caused by tariffs leads to one-time price increases. If so, then inflation may not be that scary, as short-term price spikes will lead people to abandon consumption or seek substitutes.

Indeed, if that's the case, then inflation may have a weak short-term rebound but will weaken demand, leading to a slowdown in economic growth, most likely resulting in stagflation, and the next step of stagflation is economic recession.

For the Federal Reserve, policies must be lagging, as they cannot exceed the speed of economic operation and must adjust strategies upon discovering economic issues. However, while policy lags, Powell's expectation management can be proactive. If stagflation truly occurs, the market will anticipate a recession, and at that time, Powell can once again use his title as a master of expectation management to adjust market confidence, thus acting at a critical moment to prevent the economy from truly entering recession and further demonstrating the independence of the Federal Reserve.

Of course, if tariffs lead to inflation, the worst outcome is a monthly increase in inflation, which would directly cause long-term inflation expectations to rise, representing the most pessimistic scenario. Hopefully, this won't be the case.

6. As for the decline in Trump's approval ratings due to tariffs, this is an inevitable short-term reaction, and the possibility of impeachment is also present, but I believe the probability is low.

Many of Trump's current actions feel like a gamble to me, and if he wins the bet, approval ratings will naturally return, and the "defectors" from the Republican Party will come back. Impeachment may just be a short-term danger signal and may not necessarily lead to the actual impeachment process.

If he loses the bet, it will naturally be a mess, and even if he is impeached, who can turn the tide? Don't expect the Democrats to take over the blame for this mess, right? I estimate that at this stage, even the Democrats wouldn't want to take over, as it's a hot potato they fear they can't handle.

So, we can only wait and see if Lady Luck stands by Trump's side.

Negotiations are still ongoing, so before the 9th, we can only discuss from multiple angles. Who knows, while we are discussing heatedly here, negotiations may conclude over there with tariffs unexpectedly lowered, leading to a harmonious atmosphere?

@Phyrex_Ni

BTC down 5.5%, ETH down over 10%.

There are no clear negative factors, and trading volume is not high. It doesn't seem like institutions are dumping; it feels more like short-term risk aversion.

It might be the release of expected emotions regarding the EU and US tariff retaliation on Monday. There hasn't been a major panic on-chain, and the structure hasn't been broken; the selling is mostly from exchange reserves.

If US stock futures continue to weaken tonight, Asia may follow suit in panic, but as long as there is no economic recession, I believe 70K remains a reasonable support.

In this round, I will continue to buy the dip, but with a small position and caution, waiting for the tariffs to land and GDP data before making further decisions.

When there are no reasons for a decline, it is actually the most worth paying attention to.

Technical Analysis

@chetangurjar642

Latest update on the total market capitalization of cryptocurrencies:

It has now broken below the dashed trend line on the weekly chart. If this confirms the break, the next reasonable support level is at $1.91 trillion, where the red bull market trend line and the long-term trend line intersect (both are slanted supports).

Of course, it may also further dip to the $1.61 trillion level (which may just be a spike, but honestly, it's uncertain). If it really reaches this level, the pain in the market will be unimaginable, so please be prepared in advance… By the way, if this situation occurs, the possible bottoming time could be in April.

I have already started placing some buy orders for altcoins at prices significantly lower than the current price. Additionally, this K-line still has nearly 5 hours until it closes, so I am still observing.

Let's take it step by step.

@biupa

In fact, this weekend is no different from the previous few weekends, and it’s even similar to the weekend of February 3rd. It's the same pattern of altcoins declining on Saturday and Sunday, followed by a significant drop on Sunday night, stopping the decline by Monday afternoon to evening.

@YSI_crypto

A slow rebound in a downtrend will only lead to more severe declines later.

66-72k, who agrees? Who disagrees?

I have been bearish recently, and two days ago I mentioned that the 72K-66K range is approaching. At that time, I will observe the rebound situation to decide whether to enter long positions.

@market_beggar

Black Monday: BTC makes up for the drop.

ETH falls below 1600, and both the Taiwan and Japanese stock markets trigger circuit breakers. We witness history once again.

I know that such a decline is hard for most people's psychology to bear. This article will focus on BTC, analyzing on-chain data to directly organize the important positions previously mentioned for your reference.

First is the "STH-RP adjusted for deviation" model, currently:

Green line = 77,156

Blue line = 67,554

And 71K ~ 79K remains a relative vacuum area of URPD, so from the perspective of on-chain data, I personally prefer to wait for positions below 71K.

Due to the large trend being downward, any long operations will be viewed by me as "counter-trend operations." I'm not sure how many readers can understand what I mean, but this is the direction of the market's minimum resistance.

I know most people prefer to try to operate on swings, but counter-trend operations are indeed one of the easiest mistakes for most retail investors, and this is also a lesson I learned a few years ago as a novice. I hope everyone can take it as a warning.

Trading is a process of "cognitive realization"; when the market's difficulty clearly increases, "not operating" is also a form of operation.

There is no need to chase every small swing; the smaller the level, the more the price movement resembles Brownian motion. Focus on the big trend, stick to the hitting zone, and leave the rest to patience and discipline.

The smoke of chaos in 2025 has already risen, and you and I are witnesses of history.