With the macro environment in turmoil, what is the outlook for the crypto market?

During the Spring Festival, the crypto market underwent a painful baptism. There were hopes that the new president's inauguration would bring positive news to the industry, but a series of policies on February 3 dealt a heavy blow to the market.

Under the impact of the new round of tariff policies, the global financial market has shown significant fluctuations. The US stock market has declined, and the Asia-Pacific market has also been affected. Although the implementation of the tariff policy has been postponed, the crypto market has already suffered a heavy blow.

The price of Bitcoin has plummeted significantly, dropping to $91,100 at one point, with a daily decline of about 7%. Ethereum has also seen a sharp drop of 25%, hitting a nearly one-year low of $2,080.19. The tokens ranked in the top 200 by market capitalization have generally decreased, triggering a massive liquidation, with an estimated $8-10 billion being liquidated.

This event seems to have become a watershed moment for the market. Despite the frequent positive news thereafter, mainstream cryptocurrencies experienced some recovery, but market sentiment remained weak, and price volatility intensified. Altcoins performed poorly, and even the previously strong AI sector fell into silence.

In the current situation, the market is mainly focused on two aspects: the Federal Reserve's monetary policy and the new government's encryption policy.

The Federal Reserve has paused its previous rate-cutting steps and maintained interest rates. The latest non-farm payroll data shows that the job market remains stable. However, consumer expectations for inflation have risen, bringing uncertainty to the market.

From a macro perspective, it is reasonable for the Federal Reserve to maintain a cautious stance. The new government's tariff policy may drive up inflation, and the Federal Reserve needs to reserve policy space for this. Currently, the market generally expects the Federal Reserve to start cutting interest rates in June or July this year.

The new government's attitude towards the encryption industry has also attracted attention. Some institutions that previously opposed encryption are adjusting their positions. The SEC has reduced the size of its encryption enforcement division, and several altcoin ETF applications have been accepted. The FDIC is also reassessing its regulatory approach to encryption activities, providing a compliance path for banks to participate in encryption business.

The White House has also released positive signals. Relevant departments are assessing the feasibility of building Bitcoin reserves. Several states have initiated Bitcoin strategic reserve plans, which could bring substantial incremental funds.

Despite the continuous favorable policies, the market performance has been less than satisfactory. The altcoin market is sluggish, and mainstream coins lack momentum. Investor sentiment is cautious, with increased demand for safe havens. Bitcoin's price fluctuates between $93,000 and $98,000, while Ethereum also faces downward pressure.

Institutional investors remain confident. According to data, Bitcoin and Ethereum spot ETFs continue to receive inflows. In the long term, institutions are still optimistic about the prospects of crypto assets.

Looking ahead, Bitcoin may maintain a volatile trend in the short term, with limited possibility of a significant decline. Ethereum, due to a lack of stable factors, may further drop in price. The altcoin market faces greater pressure, with obvious oversupply and tightening liquidity.

In the current environment, investors need to closely monitor macroeconomic indicators. The United States is about to release a series of important data, including inflation expectations, CPI, and PPI. This data will have a significant impact on market trends.

In summary, the crypto market is at a critical juncture. Although there are favorable policies, macroeconomic uncertainties still exist. Investors should remain cautious, closely monitor market trends, and adopt moderate risk management strategies.