The information, opinions and judgments on markets, projects, currencies, etc. mentioned in this report are for reference only and do not constitute any investment advice.
In the March report, we pointed out that the reverse is the movement of the Tao and pointed out that the sell-off and panic have been released to the greatest extent and Q2 will usher in a reversal of the market. In the end, BTC rebounded sharply in April, rising 14.11% in a single month, recovering all the losses since the tariff war.
The reciprocal tariff war that dominated the global financial market trend officially started in April, which had a fierce impact on the market, caused panic to soar, and asset prices to fall sharply. However, after the release of emotions, with the release of Trumps softening and relatively resilient US economic and employment data, rush funds poured into the US stock and crypto markets.
BTC adjusted before the US stock market, and after the US stock market bottomed out, it rose sharply driven by billions of funds. More importantly, after more than two months of adjustment, the chip structure has been greatly improved and the internal state has become more stable.
The SP 500 and crypto markets have recovered all the losses since the reciprocal tariff war. Compared with the tariff war that has not yet ended and the unresolved issue of whether the US economy will decline, the market trend is very strong and continues to price in various new information. However, for the market to reverse, it still needs the tariff war to enter the third stage (reaching an agreement) and the confirmation of US economic data. In the middle, there will be many twists and turns.
Macro Finance: Expected trade of reciprocal tariff war triggers drastic market revision
In the March report, we mentioned that the new trading judgment framework was initially established at the end of February, and the entire month of March was based on the output of the judgment framework after the continuous release of various economic, employment and interest rate data. April continued to evolve on this basis, among which Trumps softening of his statements and actions on the reciprocal tariff war played a major role. Combined with the relatively strong performance of the economic and employment data released in April, traders weakened their concerns about economic recession. Finally, after the monthly revision came to an end, forward-looking transactions betting that the tariff war would not lead to an economic recession dominated the market trend. The Nasdaq and BTC, which fell first and then rose, both recorded monthly positive returns.
On April 2, Trump declared a national emergency and initiated reciprocal tariffs; on April 3, he imposed a 10% tariff on global goods and a 104% tariff on Chinese goods. Commerce Secretary Lutnick and Treasury Secretary Bessant emphasized cooperation with allies to confront China.
From April 3 to 5, the U.S. stock market fell in panic, with all three major stock indexes falling below the annual line, and the SP 500 falling to the January 2024 point. Highly valued stocks such as Tesla and Nvidia were cut in half. Both long-term and short-term U.S. bonds fell sharply, and traders sold stocks to avoid the bond market and European stocks. Over the weekend, large-scale protests took place across the United States.
On Monday, April 7, the SP 500 VIX index broke through 60. The market sell-off entered the second phase, and U.S. bonds were sold off heavily. On the 9th, the tariffs were officially implemented, and the 2-year U.S. bond yield rose to more than 4%. On the 11th, the 10-year U.S. bond yield was close to 4.6%. On the 21st, the sell-off spread to the foreign exchange market, and the U.S. dollar index fell to 97.911, exceeding the low point of the Carry Trade collapse last year. The Nasdaq fell into a technical bear market.
Trumps reciprocal tariffs that exceeded expectations, his indifference to the decline in financial markets, and the Chinese governments tough counterattack have led to a tragic triple kill in US stocks, bonds, and currencies. This situation has caused greater panic in the market, with criticism and protests from the business and financial sectors, and has shaken the fundamental confidence of the market, forcing Trump to make concessions.
First, suspend tariffs on all countries except China for 90 days to ease tensions with allies and buy more time for negotiations. On April 23, there were reports that the Trump administration might significantly cut the 104% high tariff on Chinese goods, or even cut it by more than half, to ease tensions with China. During this period, Trump emphasized that he had been in contact with the Chinese government, but the Chinese government denied this.
Gold became the only winner, and it ushered in a round of strong rise since the 9th, rising from $2,970/ounce to a high of $3,499.93 (April 22). However, since the 23rd, after news that Trump was considering reducing the high tariffs on Chinese goods, it entered a period of continuous adjustment, and fell to $3,288.54/ounce by the end of the month. However, it still recorded a sharp increase of 5.08% in a single month.
The U.S. stock market temporarily rebounded strongly after hitting bottom on April 4, and the rebound continued after Trump softened on the 23rd. By the time this report was completed (May 2), the Nasdaq and SP 500 had fully recovered the losses caused by the tariff war.
For the whole month, the Nasdaq rose 0.85% in April, the SP 500 fell 0.76%, the Dow Jones fell 3.17%, and BTC rose 14.11%.
During this process, although the market once bet that the Federal Reserve would initiate a temporary interest rate cut and expected the probability of a rate cut in May to be more than 80%, the Federal Reserve has always maintained a tough stance. It only reiterated at the time of the triple kill of stocks, bonds and currencies that it would intervene in the market if there were any unexpected events in the job market, releasing a little dovish information.
On April 10, the U.S. Bureau of Labor Statistics released data showing that thanks to falling energy prices, the CPI (Consumer Price Index) fell by 0.1% month-on-month in March (seasonally adjusted), the first monthly decline in nearly five years, lower than the markets expected increase of 0.1%. The annualized CPI growth rate fell from 2.8% in February to 2.4% (unseasonally adjusted). The core CPI (excluding food and energy) increased by 0.1% month-on-month (lower than the expected 0.2%), and the annualized growth rate was 2.8%, the lowest since March 2021.
On April 30, the U.S. Bureau of Economic Analysis released preliminary estimates for the first quarter, showing that real GDP fell at an annualized quarterly rate of 0.3%, the lowest level since the second quarter of 2022, far below the growth rate of 2.4% in the fourth quarter of 2024, and lower than the market expectation of 0.4% (Dow Jones consensus forecast) or 0.3% (Wall Street Journal survey median on April 12).
On May 2, the Bureau of Labor Statistics (BLS) released the April non-farm payrolls report, with non-farm payrolls increasing by 177,000, higher than Dow Joness expectation of 133,000, but lower than the revised 185,000 in March (February and March data were revised down by 58,000). The average monthly increase in jobs over the past six months was 193,000, indicating that the labor market remains resilient. The unemployment rate remained at 4.187% in April (4.152% in March), in line with expectations, and the labor force participation rate rose slightly, indicating a relatively solid market. Average hourly earnings increased by 0.2% month-on-month (0.3% lower than expected) and 3.8% annualized (3.9% lower than expected), indicating moderate wage pressure.
Inflation data has cooled down, while employment data remains strong. This has temporarily reduced market concerns about a recession, coupled with Trumps softening. Although the tariff war is still going on in the second phase (negotiation), funds from retail investors and active funds have started forward-looking transactions, and large-scale purchases have driven a strong rebound in US stocks.
EMC Labs believes that the panic caused by the short- and medium-term tariff war has been relatively fully released, and the GDP data shows that at least the US economy has not suffered much damage for now, and the Trump team seems to be returning to rationality from out of control, which is why forward-looking funds dare to buy in large quantities. We tend to believe that the adjustment from February to April was a drastic adjustment of the overvalued US stocks that had risen for two consecutive years under the impact of the tariff war, and a technical test of the bear market, but there is no data to fully indicate that the US economy will enter a recession. At present, the valuation of US stocks has been cut to a certain extent, but it is not cheap. The market pricing is relatively sufficient. If it continues to rise, more conditions will be needed to support it, such as further easing of the tariff war and further decline in CPI. However, the interest rate cut is not optimistic. CME FedWatch shows that the markets expectations for interest rate cuts have been postponed to July. After a sharp rebound, we tend to be neutral. We need to pay close attention to the progress of the tariff war and economic data. If there is a trend of economic deterioration, there may be a downward revision again.
Crypto assets: stable chip structure + long-term
The price of BTC crashed at the beginning of the month and rebounded sharply at the end of the month. The trend of BTC in April is a typical example of reverse trading, buying in fear and waiting for a rapid rebound in asset prices when the situation eases.
In April, BTC opened at $82,534.31, fell to a low of $74,420.69, and closed at $94,182.54, up 14.11% for the month to $11,648.22, with a monthly fluctuation of 26.12%.
BTC price daily trend
The trend of the whole month was a decline followed by an increase, with the lowest point occurring on Black Monday on April 7. After the reciprocal tariff was officially implemented, the market bottomed out and gradually increased. Calculated by intraday gains and losses, the number of rising days in the 30 trading days was far higher than the number of falling days.
Technically, BTC retraced to the annual line three times in the plunge of the U.S. stock market, completing the confirmation of the long-term trend, and on April 22, it broke through the 200-day line with a sharp increase of 6.82%, returning to the Trump bottom (the box structure constructed after Trumps victory) and approaching the first rising trend line of this bull market (the green dotted line in the figure above).
Compared with the U.S. stock market, BTC has been very strong, thanks to the price correction that began in March, the increase in holdings by long-term holders and large investors, and favorable support at the policy and use case levels.
Since Trump signed an executive order in March to establish a strategic bitcoin reserve, many states in the United States have continued to promote their own bitcoin reserve bills. On April 30, the Arizona House of Representatives passed two bitcoin reserve bills, which are currently awaiting the governors signature. If the bill takes effect, Arizona will become the first state in the United States to allow state finances to hold bitcoin. Once the Arizona bill officially takes effect, it is believed that the progress of each state will also accelerate.
The expansion of BTCs use cases and price increases are in a mutually reinforcing continuous feedback process. In March and April, the turmoil and revision of the global financial market caused by Trumps tariff war temporarily interrupted this process. However, the internal coin holding structure and market movement of the crypto market remain intact and stable. Once the panic subsides, BTC will regain its upward trend. In the future, with the tariff war and potential turmoil in macro-finance, BTC prices will still have twists and turns. Breaking through the previous high requires that the tariff war is settled and the US economy does not fall into recession.
Chip structure: Long-term buyers and sharks increase their holdings, and long-term buyers sweep up stocks
On October 4, 2024, as funds poured into the market, the long-term group launched the second round of selling in this cycle. After absorbing the selling pressure, the strong inflow of funds continued to push the price to nearly $110,000.
BTC size held by long and short hands and exchanges
After entering March, the price of BTC fell sharply as liquidity was lost. After that, the long-hand group once again played the role of a stabilizer, turning from selling to increasing holdings.
In addition, one of the large groups of investors holding between 100 and 1,000 BTC, the Sharks, also continued to increase their holdings during the decline, and accelerated their purchases in late April, increasing their holdings by more than 80,000 coins throughout the month, becoming the backbone of the fight to turn the tide. It is worth noting that this group was also the main buyer of the BTC price from $70,000 to $100,000 from October to December 2024. Based on the fact that the scale of purchases by this group far exceeds the scale of sales in this cycle, it can be judged that the behavior of this group meets the characteristics of long-term investors, and their recognition of this price range is conducive to price stability.
After buyers from all sides swept up the market, the BTC inventory on exchanges decreased by about 60,000 in April.
The price started to fall in late February, and returned to the price in late February by the end of April. With market fluctuations, the chips were fully exchanged. Comparing the distribution of chips on January 31 and April 30, we can see that the center of gravity of chips in the range of 74,000 to 100,000 US dollars has moved down significantly, and some chips priced at more than 100,000 US dollars have moved down to the range of 74,000 to 94,000.
BTC chip distribution (January 31st vs April 30th)
The market volatility in the past two months, from the perspective of chip distribution, is that the new chips that entered the market due to FOMO were forced to sell in the sharp decline, and the shortage of chips in the 7.4-9.4 range in the past has been refilled. According to eMerge Engine data, short-term positions are now out of floating losses, and BTC in the whole chain with floating losses has also fallen to 14%. The market selling pressure caused by panic and losses has been greatly improved.
Funding: Turning the tide, over 10 billion yuan of funds rushed to buy
Taking the middle of the month as the boundary, under the pressure of the tariff war and macro-financial panic, funds in the first half of the month showed an overall outflow trend, but stablecoin funds have continued to flow in since April. By the middle of the month, with Trumps softening and the stabilization and rebound of US stocks, BTC Spot ETF channel funds also began to rush to buy, quickly pushing the BTC price to above US$94,000.
Crypto market capital inflow and outflow statistics (daily)
From a monthly perspective, funds from the ETF channel, which holds short-term pricing power, showed an outflow trend in February and March, pushing BTC prices down, while the overall fund inflow in April reached US$8.4 billion, making it the sixth largest inflow month in this cycle.
Crypto market capital inflow and outflow statistics (monthly)
The above statistics do not include the data of Strategys position increase. According to its announcement, Strategy raised funds three times in April, purchasing a total of 25,370 BTC, with an investment of more than US$2.2 billion. Therefore, the scale of capital inflow in the entire market in April exceeded US$10 billion.
The price trend of BTC is a market presentation of the inflow and outflow of funds. Currently, there are three types of fund inflows that can be counted. One is the BTC Spot ETF channel funds, which often follow the fluctuations of the US stock market; one is the fundraising of Strategy companies, which has a good inflow sustainability; and one is the stablecoin channel funds, that is, the on-site funds. Since the inflow in October 2023, there has been only one month of net outflow, and the other months have been positive inflows (not all stablecoin funds flow into the crypto market).
Although the crypto market experienced drastic fluctuations from February to April and technically fell into a bear market, we believe that the market cycle is still running in an upward phase, that is, a bull market, based on the analysis of the trend of funds and long-term distribution. EMC Labs believes that after the adjustment, the chips have returned to the long-term and large groups. This downward adjustment will help strengthen the chip structure. When the impact of the tariff war gradually subsides and the market trading enthusiasm rekindles, the BTC price will most likely break upward again.
Conclusion
In our March report, we pointed out that after the storm in the first quarter, the outlook for the second quarter is still not clear enough, but the most painful moment may have passed. Once Washington and the Federal Reserve return to a rational state of game, the market should be able to return to its own operating rules.
In April, market performance initially proved this judgment, driven by Trump’s “softening” and the relative strength of US economic data.
After several months of market adjustment and chip redistribution, the crypto market is more stable, long-term investors hold more chips, short-term investors are relieved of floating loss pressure, and floating profit has not yet appeared, with only 14% of Bitcoin in floating loss. This internal state provides solid support for the market to rise.
However, the uncertainty outside the market, especially the reciprocal tariff war, is very large. In addition, the reciprocal tariff war may trigger a US economic recession and rising inflation, which may lead to another downward revision of US stock valuations and further delay of the Feds interest rate cuts. This point needs special attention.
Market trends are the result of dynamic game between all parties under dynamic conditions. We are confident in the second half of BTC and its long-term trend, but we need to be wary of the unpredictable damage of the reciprocal tariff war to funds, sentiment and the global economy.
EMC Labs
EMC Labs was founded by crypto asset investors and data scientists in April 2023. It focuses on blockchain industry research and Crypto secondary market investment, takes industry foresight, insight and data mining as its core competitiveness, and is committed to participating in the booming blockchain industry through research and investment, and promoting blockchain and crypto assets to bring benefits to mankind.
For more information, please visit: https://www.emc.fund
