Kamis, 13 Maret 2025

📊The Market Outlook: Troubled times ahead


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Hello crypto fam,

This week: Bitcoin dips as traders react to recession fears, despite the U.S. Strategic Bitcoin Reserve announcement.

How, despite the weakening U.S. dollar and expanding global money supply, there's potential for renewed Bitcoin demand, though market-wide losses point to continued uncertainty.

And why government-controlled crypto reserves won't eliminate selling risks, particularly for smaller nations like Bhutan.

Disclaimer: Nothing contained in this newsletter should be construed as investment advice

Market overview

Top 5 cryptocurrencies by market cap | Source: crypto.news

The total market capitalization of all cryptocurrencies stands at just over $2.77 trillion today, a drop of about 4.4% over the last 7 days. Over the same time period, Bitcoin fell 6.9% to $84,046 while the Ethereum price fell 13.1% to $1,928.

Bitcoin dips as traders react to US strategic reserve news

Bitcoin had a rollercoaster of a week, with traders reacting to the U.S. government's newly signed Strategic Bitcoin Reserve executive order. Initially, it was classic "buy the rumor, sell the fact" as Bitcoin spiked, only to drop 6% once the news was official.

But there appears to be more to this than just a selloff. Analysts at Bitwise Europe note that "details of the order suggest the potential for additional government Bitcoin purchases, with implications for both gold reserves and budget allocation."

Bitcoin vs Global money supply | Source: Bitwise Europe

Meanwhile, macro factors are still playing a role. A weakening U.S. dollar has led to an acceleration in global money supply, a trend that "historically supports Bitcoin and cryptoasset growth." If that holds, it could drive "renewed demand over the coming months," the analysts say.

Amid the selloff, analysts at Bitfinex Alpha pointed out that market-wide losses have been brutal, with traders realizing $818 million in daily losses at one point. The Spent Output Profit Ratio dipped below 1 for the first time since October 2024, a sign of capitulation.

"Historically, any SOPR measure above 1.0 signals re-accumulation and bullish continuation," so all eyes are now on whether buyers step in to stabilize the market.

Market suffers selloff despite Trump's Strategic Crypto Reserve

U.S. President Donald Trump's announcement of the Strategic Crypto Reserve really "shook markets" and "turned traders risk-averse" as Bitcoin ended February down 17.39%, marking its worst return since 2014, our market analyst Ekta Mourya wrote in a recent research report.

Bitcoin, Ethereum, and U.S.-focused altcoins like XRP, Solana, and Cardano are now part of the strategic reserve. And while traders were initially optimistic, they soon turned fearful, leading to more than a billion in liquidations. Now, everyone's looking at the ongoing talks about crypto regulation.

Crypto Fear and Greed Index | Source: Alternative

The "made in USA" trend, driven by regulatory clarity and blockchain support in the U.S., initially sparked interest in tokens like XRP, Solana, and Cardano.

However, that optimism faded after the White House Crypto Summit didn't quite meet expectations, with some analysts suggesting the market now needs a "stronger boost than Trump's Crypto Strategic Reserve."

With recession fears looming, the market saw a full-scale selloff, and Solana's price suffered the most as it dropped below key technical levels for the first time since March 2022, hinting at a potential extended decline.

Strategic Bitcoin reserves won't fully remove selling risks

Despite efforts by authorities to build strategic reserves, the risk of mass sales in the crypto market remains. The U.S. DOJ's decision to approve the sale of 69,370 BTC before Trump's inauguration serves as a reminder of how such moves can still create significant volatility, analysts at French blockchain analytics firm Kaiko noted in a recent research report.

But there could be a shift in how things play out. Last week, the U.S. officially set up Bitcoin reserve, and David Sacks, the White House's crypto czar, reassured everyone that no Bitcoin from these reserves would be sold, calling it "a digital Fort Knox for the cryptocurrency." Still, Kaiko suggests this won't completely wipe out the risk of selling pressure down the line.

Current Bitcoin government holdings value | Source: Kaiko

One thing to keep in mind is that Bitcoin's potential for growth and its ease of transfer could push countries to be more flexible with their reserves.

Kaiko highlights that smaller nations, which often hold a large amount of Bitcoin relative to their GDP, might be more likely to sell off some of it when prices are right. As Kaiko puts it, these countries tend to "adopt a more active approach than developed economies."

A prime example is Bhutan, which holds 10,640 BTC, around 30% of its GDP. In 2024, Bhutan sold off a portion of its holdings to "take profits" when the market was favorable.