Author | thedefireport
Translated by | Plain Blockchain (ID: hellobtc)
Editor's Note:
From the dramatic shift in Trump's tariff policies to the recession risks hidden in U.S. economic soft data, global markets have been fluctuating driven by liquidity and sentiment. Meanwhile, BTC seems to be brewing a new high, and the entire market appears to be sensing the "Altcoin season" atmosphere.
So, what is the current market situation, and could BTC dominance potentially peak? Is the "Altcoin season" really coming? This article will provide an overview from a data indicator perspective.
We have been monitoring BTC's key support areas, planning to either exit the market (expecting further decline) or redeploy funds into higher-risk assets when cash flow allows, anticipating a possible "Altcoin season" or market peak later this year.
Next, we will discuss how we manage risks against the backdrop of tariffs and improved market sentiment.
01
Macroeconomic Landscape
Tariffs
We initially believed the Trump administration would take a hard stance towards China while negotiating with other countries. This view seemed correct when Trump raised tariffs to 145%. Of course, this effectively created unsustainable trade barriers between the world's two largest economies.
Now, we see tariffs on China are limited to 30% with a 90-day pause. The market reacted enthusiastically to this news. However, it's important to understand that the global effective tariff rate is still 17.8%, compared to just 2.5% when Trump took office.
Looking Forward
We cannot predict short-term tariff trends, and attempting to do so would be futile. But it can be said that traders who bought when Trump said "buy" and sold when he said "sell" over the past few months might have made a fortune.
Long-term readers know this is not our investment style. We look forward to returning to long-term thinking. Meanwhile, short-term perspectives also have their necessity in the later stages of a cycle.
From a long-term perspective, we strive to focus on the big picture:
Tariff rates will not return to 2.5%.
Tariffs are primarily to rebalance trade with China (a power struggle) while catering to Trump's populist base (bringing manufacturing back to the U.S.). Two birds with one stone.
Economic Recession
Before the 90-day tariff pause on China, soft data (surveys) indicated rising recession risks:
ISM Manufacturing Index fell to 48.7 in April (business cycle contraction), though services rose to 51.7 (expansion).
University of Michigan Consumer Confidence Index was 52.2 in April, far below the long-term average of 85 (71 during the COVID peak).
One-year inflation expectations rose to 6.5% in April (University of Michigan survey).
March Challenger report showed layoffs at the highest level since the Great Recession, with April slightly declining but still 63% higher than last year.
Los Angeles Port data shows a 30% decrease in cargo volume from China, expected to impact retail in May/June.
Overall, Polymarket set the recession probability at 66% on May 1st (now 40%).
We believe soft data will eventually be reflected in hard data (actual data) - currently, hard data still shows a strong economy.
Now, with a 90-day tariff pause, we believe short-term recession concerns have eased.
The question is how long this "wall of worry" can be climbed until another wave of negative news dampens expectations.
This could happen tomorrow, no one knows, making the current market more like a trader's market.
Nevertheless, there seems to be a short-term window for rising risk appetite, where capital allocators might need to chase the market.
(Translation continues in the same manner for the rest of the text)BTC needs to break through its historical high point. If this does not happen, our perspective may be irrelevant.
Summer is usually a period of volatility/consolidation. Current sentiment is somewhat extreme and may lead to further decline similar to last year.
Bond market. We believe long-term yields will eventually rise. The stock market (and cryptocurrencies) may rise during these periods, but valuations are ultimately determined by DCF calculations, and if this occurs, the stock market (and cryptocurrencies) will ultimately correct.
Stablecoin legislation did not pass the Senate last week (Democrats continue to obstruct cryptocurrencies). This is important, and the crypto market may have underestimated its impact. If this legislation does not pass, larger crypto bills may also be hindered, becoming a headwind for the asset class.
05
Summary
"Altcoin season" refers to over 50% of new inflows in the crypto market flowing into non-BTC assets. This does not mean that all Altcoins will perform well.
Asset selection and timing are crucial.
Please understand that in addition to market risks, there are many other risks. Yesterday we learned that Coinbase user data was recently exploited. As prices rise, hacking, hidden leverage, and social engineering scams bring additional risks to crypto investors.
We believe there will be opportunities to buy BTC and other blue-chip assets at a discount in the near future. But we also want to have fun and try to capture the remaining upside potential of the current cycle.
