Reverse trading dominates the market: A large amount of capital influx drives a strong BTC rebound

In the March report, we pointed out that "the reverse is the movement of the Dao" and indicated that "panic sentiment has been fully released", and that "the second quarter will welcome a reversal market". In fact, in April, BTC indeed experienced a strong rebound, soaring 14.11% in a single month, recovering all previous losses.

The tariff dispute affecting global financial markets officially began in April, causing a huge shock to the market, with panic sentiment soaring and asset prices plummeting. However, after the emotional release, as the policy stance softened and U.S. economic data showed relative resilience, funds began to flow into U.S. stocks and the crypto market.

BTC completed its adjustment ahead of the U.S. stock market, and after synchronizing with the U.S. stock market at the bottom, it surged strongly driven by a large influx of funds. More importantly, after more than two months of adjustment, the chip structure of BTC has greatly improved, and its internal state is more stable.

Major stock indices and the cryptocurrency market have recovered all losses since the tariff dispute began. The market has performed very strongly relative to the ongoing trade friction and the uncertainty surrounding the US economic outlook, continuously pricing in various latest information. However, for the market to achieve a true reversal, the trade dispute needs to be resolved and further confirmation of US economic data is required. Before that, more volatility is expected.

Macroeconomics: Tariff Disputes Trigger Market Volatility

The March report mentioned that "a new trading judgment framework was initially formed at the end of February, and throughout March, various economic, employment, and interest rate data were continuously input into this framework, producing trading results." In April, it continued to evolve based on this, with the softening of the policy stance playing a key role. Coupled with the relatively strong performance of the economic employment data released in April, traders reduced their concerns about an "economic recession," and ultimately, after the monthly adjustment ended, forward-looking trades betting that the trade dispute would not lead to an economic recession dominated market trends. Both the Nasdaq and BTC recorded positive monthly returns after initially falling and then rising.

The introduction of tariff policies has triggered severe market fluctuations. U.S. stocks experienced a panic sell-off, with all three major indices falling below their annual line. Both short-term and long-term U.S. Treasury bonds fell sharply, as traders sold off stocks and turned to the bond market and European stocks. The VIX panic index briefly surpassed 60. The selling wave spread to the foreign exchange market, with the dollar index dropping to 97.911. The Nasdaq entered a technical bear market.

However, the policy stance subsequently softened, suspending tariffs for 90 days on all countries except for a certain foreign country, in order to alleviate tensions with allies. Reports suggest that there may be significant reductions in the high tariffs on goods from a certain country, potentially by more than half.

Gold emerged as the sole winner, surging 5.08% in a single month. After temporarily bottoming out, U.S. stocks made a strong rebound, with the Nasdaq and S&P 500 fully recovering the losses caused by the tariff dispute as of May 2.

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%.

The Federal Reserve has maintained a tough stance, only releasing a few "dovish" signals during the "triple kill" of stocks, bonds, and exchange rates. Inflation data has shown signs of cooling, while employment data remains strong. This has temporarily alleviated market concerns about an economic recession. Coupled with a softening policy stance, despite the ongoing difficult trade negotiations, forward-looking funds have aggressively bought in, driving a strong rebound in U.S. stocks.

We believe that the panic triggered by the short- to medium-term tariff dispute has been relatively fully released. GDP data shows that the U.S. economy has not yet suffered significant damage, and policies seem to be returning to rationality, which is why forward-looking capital dares to make large purchases. We tend to think that the adjustment from February to April is a severe correction of the overvalued U.S. stock market after two consecutive years of growth, a technical test of the bear market under external shocks, but there is yet insufficient data to indicate that the U.S. economy will enter a recession. Currently, U.S. stock valuations have been somewhat revised down, but they are still not cheap; the market pricing is relatively full, and if it continues to rise, more conditions will be needed to support it. After a significant rebound, we tend to adopt a neutral stance and need to closely monitor the progress of trade negotiations and economic data. If a trend of economic deterioration occurs, there may be another downward revision.

Cryptocurrency Assets: Solid Chip Structure + Long-Term Trend Confirmation

The BTC trend in April is a model of "Reverse trading"; during fearful sentiment, buying and waiting for the sentiment to ease leads to a rapid Rebound in asset prices.

In April, BTC opened at $82,534.31, fell to a low of $74,420.69, and closed at $94,182.54, marking a monthly increase of 14.11% or $11,648.22, with a monthly volatility reaching 26.12%.

The monthly trend showed a decline followed by a rise, with the lowest point occurring on April 7. After that, it bottomed out and gradually increased. In the 30 trading days, the number of rising days far exceeded the number of falling days.

Technically, BTC has confirmed a long-term trend by bouncing back three times from the annual line amid the sharp decline of the US stock market, and on April 22, it surged by 6.82% to strongly break through the 200-day line, returning to the previous box structure and approaching the first upward trend line of this bullish 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 from policies and applications.

Multiple states continue 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, the state will become the first in the U.S. to allow state finances to hold BTC. Once officially in effect, it is believed that the pace of advancement in other states will also accelerate.

The expansion of BTC applications and the rise in its price are in a continuous feedback process that mutually reinforces each other. In March and April, global financial market turmoil triggered by external factors temporarily interrupted this process. However, the internal holding structure and market movements of the cryptocurrency market remain intact and stable. Once the panic subsides, BTC will resume its upward trend. In the future, with potential external turmoil, BTC's price will still experience fluctuations, and breaking through previous highs depends on the elimination of external uncertainties and the U.S. economy not falling into recession.

Chip Structure: Long-term holders and large investors increase their holdings, long-term buyers are sweeping up.

On October 4, 2024, accompanied by a fierce influx of funds into the market, the long-term holders group initiated the second wave of selling in this cycle. The vigorous capital inflow, after absorbing the selling pressure, continued to push the price up to nearly $110,000.

After entering March, the BTC price fell sharply due to the loss of liquidity. Subsequently, the long-term holders group once again played the role of a "stabilizer," shifting from selling to increasing their holdings.

In addition, the group of large holders with holdings between 100-1000 BTC has continued to increase their holdings during the decline, accelerating their purchases in late April, with an increase of more than 80,000 BTC throughout the month, becoming the backbone force in reversing the trend. It is worth noting that this group is also the main buyer that raised the BTC price from $70,000 to the $100,000 range between October and December 2024. Based on the characteristic that the buying volume of this group in this cycle far exceeds the selling volume, it can be judged that their behavior aligns with that of long-term investors, and their recognition of this price range helps stabilize the price.

After buyers from all sides stocked up, the exchange's BTC supply decreased by about 60,000 coins in April.

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

The market fluctuations over the past two months, from the perspective of chip distribution, indicate that new entrants were forced to sell their chips amid a sharp decline, while the lack of chips in the 7.4-9.4 range has been refilled. According to data, current short-term holders have moved out of unrealized losses, and the percentage of BTC in a state of unrealized loss across the entire chain has dropped to 14%. The market selling pressure caused by panic and losses has significantly improved.

Capital: Striving to turn the tide, a large amount of capital is being pooled.

Divided by mid-month, under the pressure of external factors, the overall fund flow in the first half of the month showed an outflow trend, but the stablecoin funds have continued to flow in since April. By mid-month, with the softening of policy stance and the stabilization and rebound of US stocks, funds from the BTC spot ETF channel also began to rush in, quickly pushing the BTC price above $94,000.

From a monthly perspective, the ETF channel funds that held short-term pricing power in February and March showed an outflow trend, pushing the BTC price downward. In April, the overall capital inflow reached 8.4 billion USD, making it the sixth largest inflow month of this cycle.

The above statistics do not include the data on the increase in positions of a certain company. According to its announcement, the company made three increases in positions through fundraising in April, purchasing a total of 25,370 BTC, with an investment of over 2.2 billion dollars. As such, the total inflow of funds in the entire market in April exceeded 10 billion dollars.

The price trend of BTC reflects the inflow and outflow of funds in the market. Currently, the identifiable inflow of funds can be categorized into three types: first, the funds from the BTC spot ETF channel, which often follow the fluctuations of the US stock market; second, the fundraising of a certain company, which has shown good continuity in inflow; third, the stablecoin channel funds, specifically the funds within the market, which have only experienced one month of net outflow since the inflow began in October 2023, with all other months showing positive inflow.

Although the cryptocurrency market experienced severe fluctuations from February to April, technically dipping into a bear market, based on a comprehensive analysis of capital and the trend of long-term holders distributing their holdings, we believe that the market cycle is still in an upward phase, i.e., a bull market. We believe that after the adjustment, the chips will return to long-term holders and large investors. This adjustment helps to strengthen the chip structure, and as external shocks gradually fade, market trading enthusiasm will reignite, and the BTC price will likely break upward again.

Conclusion

In the March report, we pointed out that "after experiencing the storms of the first quarter, the outlook for the second quarter is still not clear, but the most painful moments may have passed. Once the policies return to rationality, the market should be able to return to its own operating rules."

In April, the market performance initially proved this judgment, backed by a softening policy stance and relatively strong economic data from the United States.

After months of market adjustments and chip redistribution, the internal structure of the crypto market has become more stable, with long-term holders holding more chips, short-term holders having eliminated their floating loss pressure, and floating profits have yet to appear, with only 14% of BTC in a floating loss state. This internal condition provides solid support for the market's upward movement.

However, the external uncertainties in the market, especially regarding trade disputes, are very significant. Additionally, a potential economic recession in the U.S. and a resurgence of inflation may lead to a further downgrade of U.S. stock valuations, as well as a delay in the adjustment of monetary policy. This point requires particular attention.

The market trend is the result of dynamic interactions among trading parties under changing conditions. We are confident about the BTC trend for the second half of the year and the long term, but we must be cautious of the unpredictable damage that external factors can inflict on capital, sentiment, and the global economy.