Can Cryptocurrencies Break Through the Downturn? A Deep Dive into Market Bottoming Logic Amidst the Interplay of US Stocks and Bitcoin
Recently, global risk asset markets have experienced severe turbulence, with both US stocks and cryptocurrencies undergoing significant corrections. The S&P 500 has fallen by over 15% year-to-date, while Bitcoin has retreated more than 40% from its all-time high. Market sentiment has rapidly shifted from optimism at the beginning of the year to panic. Investors are left wondering: Has this round of declines reached the market bottom? Can cryptocurrencies break free from the constraints of traditional financial markets and lead an independent rally? This article will analyze the current market dynamics from the perspectives of macroeconomics, policy博弈, and market sentiment, exploring the potential for crypto assets to break through in a complex environment.
Decoding Market Sentiment Amid High Fear Index
The VIX index, which measures market fear, recently surged to 29.5, approaching the 30 threshold that signals a bear market. Looking back at data from the past decade, in 23 instances where the VIX exceeded 30, 18 cases saw a rebound of over 10% within six months. However, the six brief spikes in 2022 were followed by continuous declines, indicating the limitations of relying solely on a single sentiment indicator. Although the cryptocurrency market lacks a direct fear index, Bitcoin’s three-month correlation with the Nasdaq index stands at 0.87, suggesting that both are driven by similar risk factors. Notably, when the VIX surpasses 30, the net inflow of Bitcoin spot ETFs increases by an average of 47%, showing that some investors are using cryptocurrencies as a hedge against traditional markets. This subtle shift could create structural opportunities for crypto assets, but the sustainability of an independent rally still depends on the macro environment.
The Deadly Entanglement of Tariff Policies and Inflation Spiral
The core trigger for the current market turmoil lies in the dramatic shift in US trade policy. The Trump administration’s “April New Deal,” which imposes a 50% tariff on steel products from Canada and Mexico, has pushed the manufacturing cost index to a post-pandemic high. According to the Peterson Institute’s model, every 1% increase in tariffs raises the core PCE price index by 0.3 percentage points, causing the probability of a Fed rate cut in June to plummet from 72% to 41%. The cryptocurrency market has reacted particularly sensitively, with Bitcoin’s volatility surging 280% within 24 hours of the tariff announcement, far exceeding the fluctuations in US stocks during the same period. This amplification effect stems from both the high beta nature of crypto assets and the market’s deep anxiety over policy uncertainty.
To break the tariff-inflation loop, the White House is seeking geopolitical breakthroughs. The rare earth supply chain provisions in the draft Russia-Ukraine ceasefire agreement could offset 30% of the inflationary pressure from tariffs. If the agreement is finalized, falling energy and metal prices could reduce commodity inflation by 2-3 percentage points, creating a rebound window for risk assets like cryptocurrencies. However, policy博弈 remains highly uncertain—events such as the North American Free Trade Agreement renegotiation results on April 2, the EU carbon tariff implementation details in May, and the OPEC+ production meeting in June could reshape the inflation trajectory. Crypto investors need to closely monitor changes in the volatility index around these key dates.
The Fed’s Triple Dilemma in Monetary Policy
Faced with a complex policy environment, the Fed is caught in a trilemma: cutting rates could stimulate inflation, maintaining rates risks exacerbating a recession, and pivoting prematurely could damage credibility. The latest dot plot shows that the 2024 rate cut expectation has been reduced from three to one, with the timing pushed back to December. This policy僵局 has directly suppressed market liquidity—over the past four weeks, the Fed’s reverse repo volume has decreased by an average of $42 billion per day, but financial institutions prefer holding cash over allocating to risk assets. In contrast, the cryptocurrency market is sending a反向 signal: the total supply of stablecoins has increased by 7%, while Bitcoin reserves on exchanges have hit a five-year low, indicating that off-market funds are waiting for an opportunity to enter. This divergence suggests that some investors view crypto assets as a “parallel ecosystem” to traditional finance, but whether they can continue to divert funds depends on the effectiveness of monetary policy transmission.
Adjustments to the Supplementary Leverage Ratio (SLR) could be a key breakthrough. If the Fed includes Treasury bonds in the SLR calculation, the banking system could release approximately $800 billion in liquidity, equivalent to the stimulus effect of three 25-basis-point rate cuts. Historical data shows that within three months of the 2019 SLR adjustment, Bitcoin surged by 162%, significantly outperforming the US stock market. The crypto derivatives market has already priced in this expectation, with CME Bitcoin futures open interest up 74% month-on-month and the options implied volatility skew showing a clear bullish tilt.
Cryptocurrencies’ Positioning in the Shadow of Economic Recession
Whether the US economy is heading into a recession has become the ultimate question in determining the market bottom. Although the Q1 GDPNow forecast has slipped to -2.4%, the job market remains resilient—wage growth stands at 4.1%, and the ratio of job openings to unemployed persons is 1.4:1. This “strong micro, weak macro” dichotomy has shaped cryptocurrencies’ unique performance: Bitcoin’s correlation with unemployment data has flipped from -0.32 to +0.18, indicating its gradual inclusion in避险 asset portfolios. On-chain data corroborates this trend, with the percentage of Bitcoin addresses holding for over a year surpassing 70%, and derivatives funding rates remaining negative, suggesting that long-term investors are quietly accumulating during the downturn.
The real test comes from the credit market. Corporate bond spreads widened to 356 basis points, close to the level of March 2020, which typically foreshadows a liquidity crisis. Cryptocurrency faces a double shock in this environment: the scale of pledged lending on centralized exchanges has shrunk by 38%, and the TVL of DeFi protocols has evaporated by US$12 billion. However, decentralized stablecoins have demonstrated resilience, with the supply of DAI growing by 11% against the trend and the proportion of U.S. Treasuries in its collateral increasing to 42%. This trend of “traditional assets on the chain” may inject new stability into the crypto market.
Bottoming signals and reversal paths for crypto assets
Taking into account multiple factors, the bottoming out of the market requires the resonance of three major conditions: the breaking of the tariff-inflation spiral, the emergence of evidence of a soft landing of the economy, and a clear shift in monetary policy. In the short term, whether the core PCE can fall back below 3% in May, whether the revised version of the US-Canada-Mexico Free Trade Agreement includes tariff exemption clauses, and changes in Bitcoin ETF holdings of institutions such as BlackRock will become key indicators for observation. For cryptocurrencies, independent market conditions must meet two prerequisites: the volatility of US stocks remains in the range of 25-30, and the market value of stablecoins exceeds the US$180 billion mark.
The technical level shows that Bitcoin hash rate hit a new high and the miner holdings index dropped to 0.48. These on-chain signals often lead prices by 6-8 weeks. If the Federal Reserve starts to slow down its balance sheet reduction in the third quarter, combined with the supply shock after the Bitcoin halving, the crypto market may bottom out before the U.S. stock market. However, investors need to be wary of policy black swans – if the US Treasury Department classifies mixer transactions as illegal, or the SEC vetoes the Ethereum ETF, it may trigger a short-term liquidity crisis.
In this stress test of the global capital market, cryptocurrencies are undergoing a transformation from “risk assets” to “digital gold.” Whether it can eventually establish an independent market depends not only on its own ecological evolution, but also on the creation of a new paradigm of value storage in the cracks of the traditional financial system. When the proportion of institutional investors’ holdings exceeds 25%, the daily trading volume of compliant derivatives stabilizes at US$50 billion, and the scale of cross-chain bridging assets exceeds CEX reserves, we may witness the true “decoupling moment” of crypto assets.
