The past couple of weeks have been nothing short of extraordinary for crypto markets, with complex cross currents sharply swinging the market in different directions.
The main headwinds remain uncertainty regarding a myriad of macro factors, including geopolitics, tariffs, fiscal policy, and the outlook for inflation and economic growth. The top topics right now are trade policy, on the back of the Canada and Mexico tariffs starting today, and how the Ukraine/Russia situation will evolve after last Friday’s confrontation. Tonight Trump also takes the podium for his first congressional address of his second term.
This macro pressure was mounting while the market was also digesting a couple of internal industry issues. Although the botched Milei LIBRA memecoin launch and the Bybit hack that resulted in the loss of over $1.5 billion in ETH feel like ages ago, they took place only 19 and 12 days ago, respectively.
All in, BTC ended February briefly trading below $80,000 for the first time since the election, as spot BTC ETFs recorded a net outflow of over $3.5 billion for the month. For context, the second month with the highest net outflows was April 2024, when $346 million was withdrawn.
While a Trump social media post about the much-discussed crypto strategic reserve undid some of the downward pressure in prices in a snap (more on that below), yesterday’s price action remained dictated by these macro concerns and BTC is currently trading only a tad above the $80,000 level.
Beyond the macro news flow, the week ahead is packed with potentially market-moving industry events. The White House is hosting its first Crypto Summit, which will reportedly include a Trump keynote talk, on March 7. DC will also be home to a Bitcoin for America event on March 11, which will include a keynote by Michael Saylor.
So far the central crypto industry topic has been the idea of a strategic reserve, after Trump’s social media post moved markets over the weekend.
The post is the President’s third mention of the topic. In his first previous mention, he promised to create a stockpile during his keynote speech at the Bitcoin Nashville conference in July. In his second previous mention, he tasked his working group with evaluating the issue of a national crypto stockpile in his crypto executive order issued on January 23, just a few days after he took office.
The most recent communication brings two novel aspects.
First, this is the first time Trump has explicitly mentioned the concept of a reserve instead of a stockpile. While the latter is usually understood as not selling assets the U.S. government already holds, the former implies actual purchases in the open market.
Responding to criticism, Crypto and AI Czar David Sacks stated that the proposition will not be part of any tax or spending program. He also hinted that more details will be shared on this Friday’s Crypto Summit.
Second, and perhaps more important, President Trump mentioned for the first time the name of specific assets beyond BTC that could also be part of the reserve. XRP, SOL, and ADA were mentioned in the original post, while ETH and, of course, BTC, which were mentioned in a later quote post.
At this point, it seems safe to say that most of the industry believes that a potential strategic reserve should be BTC only. Whether Trump's decision is merely an opening gambit or something he intends to pursue to conclusion remains to be seen in the coming weeks and could be important for the price action of some the assets mentioned in his post.
While industry-specific prospects remain bright as its most important regulatory unlock is likely to start bearing fruit over the next 6-12 months, the shorter-term market environment remains exceptionally difficult to navigate given the many cross currents impacting prices.
The correlation between BTC and the S&P 500 and Nasdaq, the two leading equity indices, now sits at only 0.27. Although these recent figures are relatively low, the sharp swings in BTC correlations against risk assets over the past few months highlight how the combination of macro and industry-specific factors have been taking turns driving overall price action.
This represents a fairly unique crypto market regime. Usually there is a dominant factor, either macro or industry-specific, driving prices. The current combination of both factors influencing prices simultaneously may prevent the market from taking a decisive direction over the upcoming months.
These are the times when a high-conviction long-term view helps navigate markets. The crypto outlook over the next 12 months remains bright, with the industry's most important regulatory unlock ahead—promising significant market structure improvements and flourishing crypto use cases.
Institutional investors seem to be onboard with this message. Our desk has been seeing net buying flow of BTC and ETH across pretty much all investor personas in every week since the beginning of February despite the relatively muted price action.
