Depth Analysis | Trump's Tariff Policy Triggers a Chain Reaction, Where Exactly is the Bottom of the Crypto Market? - ChainCatcher

Original Title: Tariffs and Turmoil

Original authors: UkuriaOC, CryptoVizArt, Glassnode

Compiled by: Daisy, ChainCatcher

The Trump administration announced the "Liberation Day" tariff policy, leading to severe fluctuations in the financial markets, with major macro indexes generally declining, and the digital asset market was not spared, experiencing a comprehensive downturn.

Summary

• The news of the U.S. imposing additional tariffs severely disrupted major global financial markets, with several markets experiencing one of their worst trading days since March 2020.
• The inflow of funds into digital assets has nearly come to a standstill, with liquidity significantly contracting, bringing strong downward pressure.
• However, looking at the price trends of Bitcoin and Ethereum, as the prices decline, the scale of losses and exits is gradually decreasing, which may indicate that the selling pressure in the market is tending to exhaust in the short term.
• The decline in the entire digital asset market is widespread. The market capitalization of altcoins has dropped from 1 trillion USD in December 2024 to the current 583 billion USD.
• A comprehensive analysis of on-chain and technical models shows that to regain upward momentum, Bitcoin must re-establish itself above $93,000. The key support level that bulls must defend is in the range of $65,000 to $71,000.

Market 全面 down

The Trump administration announced the "Liberation Day" tariff policy, triggering severe fluctuations in the financial markets, with major stock indices generally declining. The U.S. policy stance has shifted towards promoting a weaker dollar, interest rate cuts, falling oil prices, and reduced fiscal spending. These factors combined could lead to a significant slowdown in the U.S. economy and trigger a substantial contraction in overall liquidity.

The uncertainty brought about by tariffs has become the catalyst for the market's "risk aversion" sentiment to heat up, triggering a large-scale sell-off, with multiple major financial indices recording their worst performance since March 2020.

Source: Yahoo Finance

The digital asset market is particularly sensitive to changes in global liquidity, and it has not been spared in this round of decline, with many cryptocurrency prices experiencing double-digit declines.

The price of Bitcoin, as the dominant asset, fell from $83,500 to $74,500, with a market capitalization evaporating by about $150 billion.

As the second largest cryptocurrency asset, Ethereum has seen a more severe decline, with its price dropping from $1,800 to $1,380, resulting in a market value reduction of approximately $40 billion.

Since the beginning of the year, the net inflow of funds into the two major mainstream crypto assets has significantly decreased. This trend is primarily reflected in the changes in the 30-day "realized market cap," which measures the changes in monthly net capital flows of the assets.

• The monthly capital inflow peak for Bitcoin once reached $100 billion, but has now shrunk to about $6 billion;
• The monthly capital inflow peak for Ethereum was $15.5 billion, and it has currently turned into a net outflow of $6 billion.

The inflow of funds into the Bitcoin network is gradually stagnating, indicating a lack of new incremental funds to support higher prices. The outflow of funds from Ethereum is mainly due to ETH bought at high levels being spent at lower levels, resulting in capital losses. This also indicates that Ethereum is currently facing greater resistance compared to Bitcoin, and its market performance is relatively weaker.

If we take the collapse of FTX at the end of 2022 as a starting point to observe the overall changes in the "realized market cap" of Bitcoin and Ethereum, we can quantify the scale of capital these two assets have absorbed since the low point of this cycle.

• The realized market capitalization of Bitcoin increased from $402 billion to $870 billion, an increase of $468 billion, a growth rate of 117%;
• The realized market cap of Ethereum increased from $183 billion to $244 billion, an increase of $61 billion, which is a growth rate of 32%.

The gap in capital inflows between the two partially explains the divergence in performance of the two major asset markets since 2023. Ethereum has attracted significantly less capital and new demand in this cycle compared to Bitcoin, resulting in relatively weak price growth and failing to reach new highs, while Bitcoin surpassed the $100,000 mark in December 2024.

The MVRV ratio is used to measure the relationship between spot price and realized price, reflecting the average unrealized profit or loss of each asset holder. When the MVRV ratio is above 1, it indicates that the average holder is in a state of unrealized profit; below 1 indicates a state of unrealized loss.

Since the start of this bull market in January 2023, the MVRV ratio of Bitcoin and Ethereum has shown a significant divergence again. Bitcoin investors have consistently held a higher level of unrealized profits, while Ethereum's MVRV ratio fell below 1.0 again in March this year, indicating that most holders have entered the loss zone.

By calculating the difference between the MVRV ratios of Bitcoin and Ethereum, we can identify whether, on average, Bitcoin holders' unrealized profits outperform or underperform those of Ethereum holders during certain periods.

• The premium indicates that Bitcoin investors have a higher average unrealized profit than Ethereum investors;
• A negative difference indicates that Ethereum investors have a stronger average profitability.

As mentioned earlier, since the start of this bull market, the average profit level of Bitcoin investors has consistently been higher than that of Ethereum investors.

As of now, this trend has lasted for 812 days, setting the record for the longest duration on record.

It can be seen that Ethereum's performance in this round is relatively weak, mainly due to the inflow scale of funds and investment demand being significantly smaller than that of Bitcoin. The diverging trend between the two can be further reflected through the ETH/BTC price ratio.

Since the "Merge" upgrade in September 2022, the ETH/BTC exchange rate has significantly dropped from 0.080 to the current 0.0196, a decrease of 75%. This is the lowest level for this trading pair since January 2020, with only 500 out of 3531 trading days having a ratio lower than the current level.

In addition, the current bull market has almost not seen a phase where Ethereum consistently outperforms Bitcoin, which is extremely rare in past bull markets, further indicating that the market structure of this cycle has clearly diverged from the historical patterns and performance familiar to investors.

Review of Loss Situation

After experiencing a significant drop like this week, it is particularly important to examine investor reactions, especially in the context of bear markets which are often triggered by rising panic and large-scale losses.

By assessing the realized loss situation within a 6-hour rolling window, we can better understand the behavior and emotional responses of market participants during the current downward trend.

The "surrender sell-off" event among Bitcoin investors was significant, with peak losses reaching as high as $240 million within a certain 6-hour window, making it one of the largest loss events in this cycle.

However, as the price dips each time, the scale of realized losses is gradually shrinking, indicating that there may be signs of short-term selling pressure exhaustion in the current price range.

Ethereum has also shown a similar behavior pattern, with a single realized loss peak reaching as high as 564 million USD during this round of decline, making it one of the largest sell-off events since the bull market began in January 2023.

As prices gradually decline, the realized losses of Bitcoin and Ethereum are weakening, which may indicate that investors are gradually adapting to the lower price range and the current turbulent market environment.

Market-wide contraction

The ongoing tightening of market liquidity has led to a significant devaluation of the entire altcoin sector. Assets further out on the risk curve are particularly sensitive to liquidity shocks, often accompanied by more severe price pullbacks.

By December 2024, the overall market value of altcoins (excluding Bitcoin, Ethereum, and stablecoins) reached a peak of 1 trillion USD during this cycle. Since then, the market value has significantly retraced and currently stands at 583 billion USD, with a decline of over 40% in just a few months.

It is worth noting that in this round of pullback, the various sub-sectors of altcoins have not shown significant differentiated trends. The overall decline is widespread, with all sub-sectors experiencing substantial depreciation, and even Bitcoin recorded negative returns in the past three months.

Interval Judgment

Finally, we will evaluate the market's response to key technical indicators and on-chain cost ranges. These reference tools help investors make judgments and decisions in a volatile and uncertain market environment.

Technical analysis has long been an important tool for investors, and Bitcoin investors typically focus on a set of key moving averages. Among these, the 111-day, 200-day, and 365-day moving averages (111DMA, 200DMA, 365DMA) are commonly used indicators for measuring Bitcoin market momentum.

You can refer to the following technical framework for analysis:

• The first drop of Bitcoin below the 111-day moving average ($93,000) marks a significant blow to market momentum, and there has not been an effective rebound attempt since.
• After the initial decline, the price fluctuated around the 200-day moving average ($87,000), a level considered by most technical analysts as the dividing line between bullish and bearish. The market displayed significant hesitation in this range, ultimately leading to another downturn and the start of a new round of price decline.
• Recently, the price has first fallen below the 365-day moving average ($76,000) since the 2021 cycle. This key momentum support level has not yet been completely breached; if it cannot stabilize, it may trigger further downward trends.

During the bullish uptrend, short-term holders (STH) are usually the group that bears the main losses in market panic selling. Their behavioral and emotional changes can serve as important reference indicators for assessing the intensity of market pullbacks and the ways investors respond.

Short-term holders (STH) cost benchmark has long been regarded as a key reference level for assessing market momentum during a bull market. Constructing a ±1 standard deviation range around this cost benchmark can typically serve as the upper and lower bounds of local price fluctuations.

• Short-term holder cost basis +1σ: $131,000
• Short-term holder cost basis: $93,000
• Short-term holder cost basis -1σ: $72,000

Bitcoin has first fallen below the short-term holder cost basis (STH-CB), indicating that market momentum is starting to weaken (it also broke below the 111-day moving average). Subsequently, the price rebounded below this cost line and faced resistance, confirming the shift in investor sentiment.

Currently, the spot price of Bitcoin has stabilized between the STH cost benchmark and one standard deviation below it, forming the upper and lower boundaries of the current trading range, that is, $93,000 to $72,000.

Active Realized Price and True Market Mean are another set of price models, typically located near the midpoint of the Bitcoin cycle. These two models estimate the cost basis of active participants in the market by excluding lost or long-unused supply.

From a statistical perspective, the spot price fluctuates above or below these two models on approximately 50% of trading days, making them important references for mean reversion, as well as for delineating the market state boundaries between bull and bear markets.

• Active Realized Price: $71,000
• True Market Mean: $65,000

Multiple on-chain price models consensus indicates that the $65,000 to $71,000 range is a key area for bulls to establish long-term support. If the price effectively breaks below this range, it will mean that the vast majority of active investors are in a state of unrealized losses, which could significantly impact overall market sentiment.

Conclusion

Due to the increasing uncertainty caused by U.S. tariff policies, pressure on global financial markets continues to rise. This weakening trend has spread to almost all asset classes, as evidenced by the significant pullback in major macro indices.

The digital asset market has also not been spared, with a comprehensive contraction across various sub-sectors. The price of Bitcoin briefly dipped to $75,000, marking one of the largest pullbacks since the bull market began in January 2023. Ethereum experienced an even more severe decline, and many long-tail crypto assets are currently deeply trapped in a bearish trend.

Based on the analysis of various on-chain and technical price models, the range of $65,000 to $71,000 is seen as a key area for bulls to rebuild long-term support. If the Bitcoin price falls below this range, market sentiment may suffer a significant blow, as the vast majority of active investors will be in a state of unrealized losses.