Crypto Market Weekly Report: The easing of tariff tensions drives the market pump, and changes in Fed policy attract follow.

Recently, the talks held between the US and China in Switzerland achieved significant results, marking a turning point in the trade relations between the two sides. This development quickly alleviated market concerns over tariff issues, and the US stock market and crypto market reacted positively.

Traders are beginning to follow a new focus: the game between a potential recession in the U.S. economy and the Fed restarting interest rate cuts. This week's released inflation and employment data shows that inflation continues to decline, employment remains temporarily stable, and the impact of tariffs seems to be lower than expected. These better-than-expected data have driven U.S. stock indices to rise significantly this week, while gold prices have fallen.

In a key speech this week, the Fed chairman mentioned the possibility of re-examining the "monetary policy framework," which could accelerate the restart of the rate cut cycle. However, the downgrade of the U.S. Treasury rating by rating agencies again highlights the seriousness of the long-term debt issues in the United States.

Macroeconomics and Policy Trends

On May 12, the United States and China announced a 90-day temporary tariff reduction agreement. The U.S. will lower the highest tariff on Chinese goods from 145% to 30%, while China will reduce the highest tariff on U.S. goods from 125% to 10%. This marks a new phase in trade friction, and the market expects that its short-term impact on the global economy may not exceed expectations.

As a result, the U.S. stock market performed strongly this week. The Nasdaq, S&P 500, and Dow Jones indices rose by 7.15%, 5.27%, and 3.41% respectively, marking four consecutive weeks of gains. If expectations for interest rate cuts strengthen further, the market may break through historical highs in the short term.

The CPI data for April shows that the seasonally adjusted month-on-month rate is 2.3%, lower than expected and has decreased for three consecutive months. In terms of employment data, the number of first-time unemployment claims is 229,000, in line with expectations. The Producer Price Index (PPI) is 2.4%, slightly below expectations. This data indicates that the tariff issue has not yet had a substantial impact on consumption, while inflation continues to decline, creating favorable conditions for the resumption of interest rate cuts.

The Fed Chairman stated in a speech that the monetary policy framework introduced in 2020 may need adjustments in the current economic environment. He mentioned that frequent supply shocks make it difficult for the average inflation targeting regime to respond, necessitating more flexible policies to balance inflation and employment objectives. This remark could imply that the Fed will make decisions based on shorter-term CPI data, thereby increasing policy flexibility.

Meanwhile, the U.S. debt issue remains a significant hidden danger. This year, the U.S. added $1.9 trillion in debt, with the scale of debt to be refinanced possibly reaching $9.2 trillion. If interest rate cuts are not initiated quickly, the U.S. government will not only continue to bear high interest costs but may also face difficulties in auctions in the primary market.

On May 16, a rating agency downgraded the long-term issuer and senior unsecured debt rating of the U.S. government from Aaa to Aa1, marking the first downgrade of U.S. Treasury bonds by the agency since 1917. This move signifies that the U.S. has lost the highest credit rating from the three major rating agencies.

Crypto Market Performance

Bitcoin maintained a high-level consolidation for most of this week, suddenly rising to $106,692.97 on Sunday, with a weekly increase of 2.24%. Technical indicators show that Bitcoin traded above the "first uptrend line" throughout the week, approaching the upper edge of the "Trump bottom". The overbought indicator has seen some correction, with trading volume comparable to last week.

Capital Flow Situation

This week, the funds flowing into the crypto market remain active, with a total of $2.527 billion flowing in through two major channels, including $1.880 billion in stablecoins and a combined $647 million in Bitcoin ETFs and Ethereum ETFs. It is worth noting that the fund inflow through the ETF channel has shown a downward trend over the past four weeks. The on-chain lending funds are in an expansion phase, and the contract market has entered the second expansion phase of this round of market conditions.

Market Selling Pressure Analysis

After Bitcoin returned to $100,000, some bottom-fishing funds took profit. With liquidity restored, some long-term holders also made small sales. Overall, the pattern of "long hands reducing holdings and short hands increasing holdings" has not yet fully formed, and experienced long-term investors seem to be waiting for higher prices.

Data shows that this week, the inflow of Bitcoin into exchanges was 127,226 coins, marking a decline for four consecutive weeks; the outflow from exchanges reached 27,965 coins, the highest since the beginning of the year. A decrease in sell-off and an increase in purchases usually indicate that prices may rise rapidly when external conditions are favorable.

Cycle Indicators

According to the cyclical indicators of a certain data platform, BTC Cycle Metrics is currently at 0.875, in a rise period.