February macroeconomic data triggers market fluctuations, BTC welcomes a good opportunity for medium to long-term investment

The global macro financial environment, especially the US market, experienced a rapid and dramatic shift in February.

U.S. inflation data rises, consumer confidence drops to a 15-month low, leading traders to begin pricing in expectations for a potential economic recession. This has driven the three major U.S. stock indices to quickly fall near the 120-day moving average.

Funds are starting to take hedging measures, the yield on the 10-year U.S. Treasury bonds is rapidly declining, and there are signs of a top formation in gold.

Affected by the movement of the US stock market, BTC, which had been building momentum, experienced a significant drop in the last week of February, marking the largest pullback and the biggest weekly loss in this cycle.

Industry analysts believe that this market trend is essentially a correction of previous optimistic expectations. Based on the self-adjustment capabilities of U.S. policies and the long-term positive logic of the crypto market, BTC is currently welcoming a good opportunity for medium to long-term positioning, and one can gradually build a long position on a cautious basis.

Macroeconomics: Economic recession expectations drive the market downward, which may continue to face pressure in the short term.

The US employment data released in early February fell short of expectations, followed by inflation data rebounding for three consecutive months, and the consumer confidence index dropping to a 15-month low. These data have intensified concerns in the market about a recession in the US economy, while also solidifying the Federal Reserve's stance on postponing interest rate cuts.

As a result, the three major U.S. stock indexes saw a significant drop in the week following February 21, wiping out all gains made in the month. The Nasdaq index fell 3.97% for the month, the Dow Jones index fell 1.58%, and the S&P 500 index dropped 1.42%, while the small-cap index RUT2000 plummeted 5.45%. Both the Nasdaq and the S&P 500 fell below the 120-day moving average.

In addition to the deterioration of economic data, the erratic decision-making of a certain political figure regarding tariff policies has also left the market feeling confused and pessimistic. The tariff policy, which was originally seen as a tool for political negotiation, is about to be implemented, and this may become an important factor in pushing up inflation.

The market originally had expectations for the Russia-Ukraine negotiations, believing that they could have a positive impact on inflation and interest rate cuts. However, at the end of February, the leaders of the two countries had a dramatic confrontation at a White House press conference, resulting in the collapse of the agreement that was scheduled to be signed. Subsequently, European leaders expressed support for Ukraine, which could further exacerbate the differences between the US and Europe.

Since November last year, the market has been trading based on expectations of strong economic growth. Now, with weak employment data, persistent high inflation, and tariff policies exacerbating inflation expectations, market expectations have reversed, beginning to price in a recession. According to this logic, the decline of the three major stock indices may only be the beginning.

After mid-January, the yield on the 10-year U.S. Treasury bond continued to decline, falling from a peak of 4.809% to 4.210%. This significant change in the "pricing anchor" reflects the capital market's pessimistic expectations regarding an economic recession.

In the face of rebounding inflation, signs of economic recession, and significant declines in stock and treasury yields, market expectations for the Federal Reserve's rate cuts this year have once again heated up, with the anticipated number of rate cuts increasing from 1 to 2. From a technical perspective, both the Nasdaq and the S&P 500 index have fallen below the 120-day moving average. Given the current severe situation, if the market's expectations for rate cuts do not receive a positive response, it may continue to decline in the short term.

Crypto Assets: Early Support Broken, Long-term Good Opportunity for Allocation

In February, the opening price of BTC was $102,414.05, the closing price was $84,293.73, the highest reached $102,781.65, and the lowest fell to $78,167.81, with a monthly decline of 17.69%, a drop of $18,113.53, and a fluctuation of 24.03%. The maximum drop from the peak reached 28.52%, setting the largest retracement since January 2023 in this cycle (.

It is worth noting that the decline for the entire month was mainly concentrated in the last week, and the sharp drop in a short period of time plunged the market into an extreme state of panic. Corresponding to the maximum decline of the cycle, the Fear and Greed Index dropped to 10 points on February 27, marking the lowest point of this cycle, close to the 6 points seen during the collapse of a well-known project in the previous bear market phase.

From a technical perspective, the previous support has been effectively broken, which echoes the retraction of optimistic expectations in the U.S. stock market. The "first rising trend line" and "second rising trend line" that were previously focused on were both quickly breached in a short period of time. By the end of the month, the BTC price closed near the 200-day moving average.

In addition to being correlated with the US stock market, the cryptocurrency market's significant cyclical decline this month is also related to negative events within the market.

On February 14, the president of a certain country promoted a MEME coin on social media, triggering a speculative frenzy and pushing its market value to soar to $4.5 billion. Subsequently, the creator withdrew funds from the trading pool, causing the coin price to plummet rapidly, resulting in heavy losses for investors.

On February 21, a suspected hacker from a certain country exploited a technical vulnerability of a certain exchange, stealing over 400,000 ETH and stETH, with a total value exceeding $1.5 billion, becoming the largest attack in cryptocurrency history in terms of USD.

On February 23, a certain project contract was attacked, with stolen funds exceeding $49 million.

In addition, the unlocking of SOL tokens due to the bankruptcy liquidation of a certain exchange on March 1 will amount to 11.2 million tokens, with a total value of approximately $2 billion. The scale of the unlocking will reach 2.29% of the total issuance of SOL, driving the price of SOL to fall by more than 50% throughout the month in a weak market backdrop.

Industry analysis believes that the largest drop in the crypto market in February was directly caused by the decline in the US stock market driven by recession expectations, which can also be understood as a correction of previous optimistic pricing. Based on the decline in the US stock market, BTC could theoretically drop to the line of 73000 USD at its lowest. However, considering that certain policy changes will significantly enhance BTC's fundamentals, which far exceed that of the US stock market, the probability of reaching this theoretical low is relatively low. The cycle is still ongoing, and based on the US policy's self-adjustment capability and the long-term positive logic in the crypto market, BTC is currently welcoming a good opportunity for medium to long-term allocation, and one can cautiously build positions in batches to go long.

![EMC Labs February Report: U.S. Economic Recession Expectations Resurface, BTC Faces Cyclical Heavy Impact, Welcoming Medium to Long-Term Allocation Opportunity])https://img-cdn.gateio.im/webp-social/moments-1a5cb55bda4acd24edf8b1f7405929b2.webp(

Capital Flow: BTC Spot ETF Experiences Significant Outflow, Becoming a Direct Reason for the Decline

As the earlier optimism cooled, the inflow of funds into the crypto market in February slowed significantly. This slowdown in inflow interacted continuously with the price decline, ultimately leading to a sharp drop in BTC price after a prolonged consolidation around the $96,000 level in the last week of February. The scale of fund inflow in February dropped significantly to $2.111 billion.

In-depth analysis of capital flows reveals a divergence between stablecoin funds and BTC spot ETF channel funds. Stablecoin channels saw an inflow of $5.3 billion for the entire month, while ETF channel funds experienced an outflow of as much as $3.249 billion.

The BTC spot ETF has gained control over the medium and short-term pricing of BTC, thus the price trend of BTC is highly correlated with the performance of the US stock market. This month, the outflow from the BTC spot ETF channel exceeded $3.2 billion, setting the largest single-month sell-off record since its listing, becoming the most direct external reason for the decline. The subsequent trend of BTC mainly depends on the improvement of US economic expectations and the inflow of funds back into the BTC ETF spot channel.

![EMC Labs February Report: Expectations of US Economic Recession Resurface, BTC Faces Cyclical Heavy Damage, Welcoming Mid to Long-term Allocation Opportunity])https://img-cdn.gateio.im/webp-social/moments-41e03b6c5008a0e8c5b654b22cbc9f23.webp(

![EMC Labs February Report: Expectations of US Economic Recession Resurface, BTC Faces Cyclical Heavy Damage, Seizing Mid to Long-term Configuration Opportunities])https://img-cdn.gateio.im/webp-social/moments-0f9539c92c378d5ceb4f69687f5cf53d.webp(

![EMC Labs February Report: US Economic Recession Expectations Resurface, BTC Faces Cyclical Heavy Blow, Welcomes Medium to Long-term Allocation Opportunity])https://img-cdn.gateio.im/webp-social/moments-d030eda89aa09cd72eba3dd89666270b.webp(

On-chain data: Short-term investors' sell-off is evident

Since the second round of sell-off began on October 2, 2024, 1.12 million BTC have been transferred from long-term holders to short-term holders. The second round of sell-off is seen as a necessary condition for the end of a bull market cycle, with the underlying logic being that once the scale of active BTC grows to a certain level, liquidity will be exhausted, leading to a complete break in the upward trend.

Looking back at the consolidation and crash in February, long-term holders have shown extreme restraint, selling only 7,271 coins. In fact, existing long-term holders are no longer paying attention to quotes in the $89,000 to $110,000 range, choosing to hold their coins and wait for a price increase.

In the last week of February, the transferred loss chips mainly came from short-term holders. On-chain data analysis shows that until February 24, short-term holders were still holding firm, but on the 25th, there was a collapse, with short-term holders realizing a loss of $255 million that day alone. This was the second largest loss day in this cycle, second only to the on-chain loss of $362 million on August 5, 2024 ). Historical experience indicates that after short-term holders experience large losses of a similar scale, the market often welcomes a phase bottom.

In-depth on-chain analysis reveals that since February 24, the BTC in the range of $78,000 to $89,000 has increased by 564,920.06 coins, while the BTC in the range of $89,000 to $110,000 has decreased by 412,875.03 coins.

The chips in the range of 89000~110000 USD were mainly formed between last November and this February, and the holders in this range are typical short-term investors. The selling of chips by short-term investors at a loss attempts to build a mid-term bottom, which also solidifies the range of 73000~89000 where there are fewer chips.

Conclusion

According to previous analysis, the current sell-off of loss-making chips mainly comes from short-term investors, while long-term holders have quietly slowed down their sales and are holding coins in anticipation of a rise. Industry experts believe that the current bull market is only in a consolidation phase and has not yet turned bearish.

In February, the largest scale pullback of BTC in this cycle occurred due to the adjustment in pricing of the "economic recession expectations" by the US stock market, which was at historical highs, leading to a large outflow of funds from the BTC spot ETF. The momentum for market reversal will also come from the shift in expectations and trend rebound of the US stock market.

The internal structure of BTC and the cryptocurrency market is relatively stable, still operating within cyclical patterns, and the short-term price decline presents a good opportunity for mid to long-term positioning.

What needs to be closely monitored are the trends in the U.S. macroeconomy, market expectations, and the Federal Reserve's attitude towards restarting interest rate cuts.