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

After Trump's election victory, U.S. stocks and BTC simultaneously started the 'Trump market.' Trading parties have strong confidence in Trump's economic policies, driving this market to continue rising, lasting until December 18th. On that day, the Fed made hawkish statements, 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 to 2. After this, both U.S. stocks and BTC started significant downward adjustments.

The same is true for capital flows; before December 18th, there was a vigorous inflow, but after the 18th, it quickly turned into an outflow.

Although it has hit new highs, before the 18th, BTC maintained an upward shape, gradually approaching $110,000. The Fed's policy shift triggered a cooling of trading sentiment, and this cooling made BTC 'unbearably high,' forcing it to start a downward move.

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

Is the CPI behind still important?

Since September 2024, the Fed has cut interest rates three times, totaling 100 basis points, bringing the federal funds rate down to 4.33%. Although still at a high level, the data does not indicate any suppression of economic activity; both new jobs and unemployment rates suggest that the U.S. economy is in a healthy state. However, inflation rebounded over 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 guidance from economic data, that is, a weakening of economic activity or a decline in CPI.

In 2024, although experiencing twists and chaos, the three major U.S. stock indexes have achieved significant increases for two consecutive years. Looking ahead to 2025, systemic risks remain low, with uncertainties stemming from conflicts between Trump's economic policies and monetary policies.

Due to market linkage reasons, if BTC wants to fully break through the $100,000 barrier, it may require a clear direction from U.S. stock trading entities, and stock indexes to regain an upward trend.

BTC Market Share

BTC's market share has long been above 50%, peaking at 57.53% (November 21), after which it began to decline, dropping to a minimum of 51.22% (December 8), and then rebounding again, but the trend could not continue. This indicates that altcoins have not received sufficient long-term capital attention, mainly experiencing sharp rises and falls under short-term speculative funds or manipulation after BTC's significant rise, making it much more difficult for investors to operate.

Moreover, although various concepts and projects such as LRT, RWA, AI, Layer 2, and DePhin have emerged sequentially, they have not produced the long bull market trajectories seen in the last bull market's DeFi and high-performance public chains, lasting a year or even 20 months. This is particularly noteworthy.

The stage market momentum that began on November 4th comes from the speculative enthusiasm of the 'Trump trade.' This sentiment was quickly cooled on December 18th when the Fed lowered interest rate cut expectations. During this period, BTC adjusted along with U.S. stock indexes, and the retracement was at a relatively low level in the historical bull market retracement records, with the Nasdaq's volatility ratio also in a reasonable range.

Currently, there is still ample capital in the market, and there is not much crisis; the subsequent focus will be on whether the U.S. stock market can regain an upward trend after Trump takes office, and whether capital will flow back into the crypto market.

However, if the U.S. stock market adjusts for a long time and selling pressure accumulates, BTC cannot be ruled out from probing new lows. If so, the decline in Altcoins may be even greater.

Pay attention to the subsequent selling pressure.

Currently, the BTC and crypto asset market is in a bull market rising phase. The main market activity during this phase is characterized by long-hand selling chips, while short-hand continuously increases holdings, and the continuous increase in liquidity drives asset prices to rise steadily.

The long-hand group conducted the first wave of selling in this cycle between January and May this year, returning to accumulation in June, with positions reaching 14,207,303.14 by October. Starting in October, accompanied by rising prices, selling was restarted; this wave of selling marks the second time in this cycle. Historically, this wave of selling will continue until the transition period, that is, the peak of the bull market.

Massive sell-offs absorbed the influx of funds, and once subsequent capital inflows become difficult to maintain, prices can only adjust downwards for the market to establish a new balance.

The behavior of the long-hand group depends on the will of this group as well as capital inflow situations; whether subsequent actions involve continued or paused selling needs to be observed continuously.

If capital inflows resume and selling pressure decreases, prices may recover upward; if capital does not resume inflows or only flows in minimally, and long-hands continue to sell, prices will break down from the new consolidation range of $90,000 to $100,000; if capital does not resume inflows or only flows in minimally, and long-hands pause selling, the market will likely oscillate within the new consolidation range, waiting for larger capital inflows.

The timing and scale of adjustments primarily depend on when mainstream funds in the U.S. stock market resume bullishness and the selling plans of the long-hand group.

For the broader crypto market, the most concerning question right now is when the second phase of the rising period has opened, when the altcoin season will start, and how to better seize the opportunity for the next major upward wave.

The first half of the year will still maintain the rhythm of a bull market, but mid-year and after the third quarter, caution should be taken against the risk of reaching a peak and adjusting, and it is important to grasp the timing of exit. From a cyclical perspective, as institutional funds continuously enter this cycle and future regulations become increasingly standardized, the overall market cycle may be extended in terms of time.