The expectation of a US economic recession reappears, BTC faces a heavy blow but welcomes allocation opportunities

Recently, the global macro financial environment, especially in the US market, has undergone a dramatic change.

US inflation data rises, consumer confidence falls to a 15-month low, prompting traders to start pricing in recession expectations, leading the three major stock indices to quickly drop near the 120-day moving average.

Funds are starting to seek refuge as the yield on the U.S. 10-year Treasury bonds drops rapidly, and gold is also showing signs of peaking.

Affected by the US stock market, BTC, which had been building momentum, plummeted in the last week of February, experiencing the largest drawdown of this cycle and the biggest weekly loss.

Analysis suggests that this wave of market movement is essentially a correction of previous optimistic expectations. Based on the self-adjusting ability of U.S. policies and the long-term prospects of the cryptocurrency market, the current situation may be a good opportunity for medium to long-term positioning in BTC, and it may be worth considering a cautious incremental increase in long positions.

Macroeconomics: Economic recession expectations drive the market downward, short-term pressure may continue.

The recent economic employment data and policy turmoil released by the United States have become key factors influencing the recent trends in the macro financial and cryptocurrency markets.

The non-farm payrolls in January, announced in early February, were only 143,000, far below expectations, increasing market concerns about a recession in the U.S. economy.

The subsequently released CPI data showed that the January CPI monthly rate reached 0.5%, while the annual rate hit 3%, both exceeding expectations. This marks the third consecutive month of inflation rebound in the United States, reinforcing market expectations that the Federal Reserve may delay interest rate cuts.

In late February, the U.S. Consumer Confidence Index fell to its lowest level in 15 months, further dampening market sentiment. U.S. stocks subsequently plummeted, with the Nasdaq dropping nearly 4% for the month and the small-cap index falling by 5.45%. Both the Nasdaq and the S&P 500 fell below the 120-day moving average.

For traders, the rebound in inflation combined with deteriorating employment prospects and the renewed shadow of economic recession makes reducing long positions the preferable choice at present.

In addition to economic data, uncertainty in policy has also heightened market concerns. The erratic nature of tariff policies has caused chaos and may further increase inflation. The previously hopeful Russia-Ukraine talks aimed at alleviating inflation have also encountered setbacks, making it difficult to see results in the short term.

The optimistic expectations since the end of last year are reversing, and the market is starting to price in a recession. The yield on the U.S. ten-year Treasury has fallen from a high of 4.809% to 4.210%, reflecting the capital markets' pessimistic outlook on the economic prospects.

Against this backdrop, market expectations for the Federal Reserve to cut interest rates this year have been raised from once to twice. However, if this expectation is not met, the market may continue to feel pressure in the short term.

Crypto Assets: BTC suffers heavy losses, or may welcome mid- to long-term layout opportunities

In February, BTC opened around $102,000 and closed at around $84,000, down 17.69% for the month, with a volatility of 24.03%. The maximum drop from the peak was 28.52%, marking the largest pullback of this cycle.

The decline was mainly concentrated in the last week of the month, leading to a rise in market panic. The Fear and Greed Index once fell to 10 points, the lowest of this cycle, approaching the level during the last cycle when LUNA collapsed.

From a technical perspective, the previously monitored support levels have been consecutively breached. At the end of the month, BTC closed near the 200-day moving average.

In addition to the correlation with the US stock market, some negative events have also emerged within the crypto market. These include the Argentine president's involvement in promoting MEME coins and a suspected North Korean hacker attack on exchanges, which have shaken market confidence.

Analysis suggests that the significant drop in the cryptocurrency market in February is directly driven by the decline linked to expectations of an economic recession in the U.S. stock market. Theoretically, BTC could drop to a minimum of $73,000, but considering the favorable policy environment, the probability of this extreme scenario occurring is relatively low.

Based on the self-adjustment capability of U.S. policies and the long-term prospects of the crypto market, we may have currently entered the medium to long-term layout window for BTC, and it may be wise to consider cautiously increasing positions in batches.

Capital Flow: Large Outflows from BTC Spot ETF Become Direct Cause of Decline

In February, the inflow of funds into the cryptocurrency market slowed to $2.111 billion. Among them, the stablecoin channel saw an inflow of $5.3 billion for the whole month, while the ETF channel experienced an outflow of as much as $3.249 billion, setting a record for the largest monthly outflow since its listing.

The BTC spot ETF has largely gained control over the medium to short-term pricing power of BTC. Therefore, the subsequent trend of BTC mainly depends on the improvement of economic expectations in the United States and the inflow of funds into the ETF.

On-chain data: Large-scale losses appear in short-term chips

On-chain data shows that short-term holders were still holding on before February 24, but a crash occurred on the 25th, with short-term holders realizing a loss of $255 million that day, marking the second-largest single-day loss in this cycle. Historical experience indicates that after short-term holders experience such a scale of loss, the market often sees a phase of bottom.

In-depth analysis shows that since February 24, the BTC in the range of $78,000 to $89,000 has increased by 564,900 coins, while the range of $89,000 to $110,000 has decreased by 412,900 coins. This indicates that short-term speculative chips are being sold off, attempting to build a mid-term bottom.

Conclusion

In February, BTC experienced the largest scale pullback of this cycle, mainly due to the downward revision of economic recession expectations in the US stock market, which led to a significant outflow of ETF funds.

Currently, long-term holders have slowed down selling and are holding onto their coins, judging that the bull market is still ongoing and has not yet turned bearish.

BTC and the cryptocurrency market are still operating within the cyclical track, and a short-term price drop may present medium to long-term allocation opportunities.

Need to closely monitor the trends in the US macroeconomic environment, changes in market expectations, and the Federal Reserve's attitude towards restarting interest rate cuts.