Since the issuance of the BTC Spot ETF, the correlation between BTC prices and US stocks has become stronger. This has been vividly reflected in the market since November.

After Trump's victory, US stocks and BTC both started the 'Trump market'. Trading parties have strong confidence in Trump's economic policies, pushing this market to continue rising until December 18. On that day, the Fed made hawkish remarks, suggesting a possible change in monetary policy, and the market expected the number of rate cuts in 2025 to be significantly revised down from 4 times to 2 times. Subsequently, both US stocks and BTC began to undergo significant corrections.

The flow of funds is similar; before December 18, there was a strong inflow, but after the 18th, it quickly turned into an outflow.

Although it has continued to hit new highs, before the 18th, BTC maintained an upward trajectory, gradually approaching $110,000. The Fed's policy shift has cooled trading sentiment, and this cooling has forced BTC to initiate a downward move from its 'high point'.

The world is still in a cycle of interest rate cuts; the current cooling is just a temporary setback. As liquidity gradually recovers, BTC will once again challenge the $100,000 mark after adjusting at a high level.

Is the CPI behind still important?

Since September 2024, the Fed has cut interest rates three times for a total of 100 basis points, bringing the federal funds rate down to 4.33%. Although it is still at a high level, the data does not show any suppression of economic activity, as both new employment and unemployment rates indicate that the US economy is in a healthy state. However, inflation rebounded for two months, leading the Fed to decide to pause interest rate cuts to observe whether inflation data can decline.

This pause is seen as the end of the first phase of interest rate cuts, and a second restart requires more economic data guidance, namely weakened economic activity or declining CPI.

In 2024, despite experiencing twists and turns and chaos, the three major US stock indices have achieved significant growth for two consecutive years. Looking ahead to 2025, systemic risk is still low, and the variable lies in the conflict between Trump's economic policies and monetary policies.

Due to market linkage, if BTC wants to break out of the adjustment and thoroughly conquer the $100,000 mark, it may require clear direction from US stock trading and a return to upward movement in stock indices.

BTC Market Share

BTC market share has remained above 50% for a long time, reaching a maximum of 57.53% (November 21), and then started to decline, dropping to a minimum of 51.22% (December 8), and then rebounding again, but the trend could not continue. This shows that altcoins have not received sufficient long-term capital attention, but rather have experienced sharp rises and falls under the control of short-term speculative capital or manipulation after BTC's significant rise, making it much more challenging for investors to operate.

Moreover, although various concepts and projects such as LRT, RWA, AI, Layer 2, and DePhin have emerged one after another, they have not produced the long bull market of the last bull cycle lasting a year or even 20 months like DeFi and high-performance public chains. This is particularly noteworthy.

The momentum of the stage market that began on November 4 comes from the speculative enthusiasm for the 'Trump trade', which was quickly cooled by the Fed lowering interest rate cut expectations on December 18. During this period, BTC adjusted alongside US stock indices, with the decline remaining at a relatively low level in the historical records of bull market pullbacks, and the volatility ratio with the Nasdaq also remained within a reasonable range.

Currently, there is still ample capital in the market, and there is no significant crisis; the next focus is whether US stocks can return to an upward trend after Trump's administration and whether capital will flow back into the crypto market.

However, if US stocks adjust for a long time, with sell pressure accumulating, BTC does not rule out exploring new lows again. If so, the decline of Altcoins may be even greater.

Pay attention to subsequent selling pressure.

Currently, the BTC and crypto asset market is in a bullish uptrend. The main market activity in this phase is characterized by long hands selling off chips, while short hands are continuously increasing their holdings, and the continuous increase in liquidity is driving asset prices to rise.

The long-hand group conducted the first round of selling in this cycle between January and May this year, returned to accumulation in June, and by October, the holding reached 14,207,303.14. Since October, accompanied by rising prices, selling has restarted; this round of selling is the second of this cycle. Historically, this round of selling will last until a transition period, i.e., the peak of the bull market.

Massive sell-offs absorbed the influx of funds, and once subsequent capital inflows are difficult to sustain, prices can only be adjusted downward for the market to establish a new balance.

The behavior of long hands depends on the will of this group and the situation of capital inflows; whether subsequent selling is sustained or paused needs continuous observation.

If the flow of funds resumes, selling pressure decreases, prices may recover upward; if funds do not resume inflows or only a small amount flows in, and long hands continue to sell, prices will break downward from the new consolidation range of $90,000 to $100,000; if funds do not resume inflows or only a small amount flows in, and long hands pause selling, the market is likely to oscillate in the new consolidation range, waiting for larger-scale capital inflows.

The timing and scale of adjustments primarily depend on when mainstream capital in US stocks resumes buying, as well as the selling plans of the long-hand group.

For the broader crypto market, the most pressing issue right now is when the second phase of the uptrend has opened, when will the altcoin season start, and how to better seize the opportunity for the next major rally.

The first half of the year will continue the rhythm of the bull market, but mid-year and after the third quarter, caution is needed for peak correction risks, and timing for exit must be grasped. From a cyclical perspective, as institutional funds continue to enter this cycle and future regulation becomes increasingly standardized, the overall market cycle may be extended in terms of time dimension.