Global asset differentiation intensifies, Crypto Assets become the new balance point

At the beginning of April, the new tariff policy triggered a significant decline in global assets, and the subsequent softening of the policy stance alleviated market concerns. After investor sentiment was soothed, risk appetite surged again, with Bitcoin showing a strong upward trend first.

From the economic data, the core macroeconomic indicators of consumption and employment in the U.S. in April have not yet been severely affected, but risks have clearly increased. In March, the U.S. non-farm payrolls added 151,000 jobs, and the unemployment rate rose to 4.1%, with data better than expected. However, the new tariff policy implemented in April raised the average tax rate significantly from 2.4% to 21.4%, causing the import price index to rise by 18.6% year-on-year. Retail sales in March surged by 1.4% month-on-month, mainly driven by a rush to buy before the car tariffs took effect, but the actual consumption growth, excluding cars, was only 0.5%, a decrease of 0.15 percentage points compared to February.

This policy-driven short-term consumption overdraft sharply contrasts with the largest decline in the consumer confidence index since 1978 in April. The preliminary value of the University of Michigan Consumer Confidence Index in April was 50.8, far below the expected 53.5 and lower than March's 57, marking the fourth consecutive month of decline. The preliminary value of the 1-year inflation expectation from the University of Michigan in April surged to 6.7%, the highest since November 1981; the 5-year inflation expectation preliminary value reached 4.4%, the highest level since June 1991. The significant weakening of these expectation-based soft indicators reveals the unsustainability of the economy.

The U.S. economy is facing the stagflation dilemma of "high inflation - low growth - policy conflict." The negative effects of tariff policies will accelerate through three channels: supply chains, the job market, and consumer confidence. The International Monetary Fund's latest report has lowered its global economic growth forecast for 2025 from 3.3% to 2.8%, with the U.S. growth rate expected to drop to 1.8% and the Eurozone to 0.7%.

On the Federal Reserve side, the PCE inflation rate has been above the 2% target for 14 consecutive months, with short-term inflation expectations soaring to 3.8% in April, the highest since 1982. In this situation, the Federal Reserve's March 19 meeting decided to keep the federal funds rate unchanged in the range of 4.25%-4.50%, clearly caught in a triple dilemma: lowering interest rates could exacerbate inflation expectations out of control, raising rates would accelerate economic recession, while maintaining the status quo faces political pressure. The Federal Reserve chairman stated that they will continue to observe the economic situation and wait for clearer signals before considering adjustments to interest rates.

As the "anchor point" of global monetary policy, the Federal Reserve is undergoing the most severe test of policy imbalance in nearly forty years. There is widespread expectation that, in the most optimistic scenario, if inflation decreases faster than expected, the Federal Reserve may shift to a neutral interest rate more quickly, potentially even starting to lower interest rates in the first half of 2025.

Throughout April, US dollar assets faced a dual blow from policy uncertainty and economic downturn, especially in the first half of the month where market sentiment was extremely pessimistic. On April 3rd, the three major US stock indices experienced a historic drop, marking the largest single-day decline since March 2020. Tech stocks were hit the hardest, with several large tech companies plummeting due to rising supply chain costs and export restrictions. Some economic research institutions even raised the probability of a US economic recession to 79%, reflecting deep concerns in the market about the long-term negative impacts of tariff policies.

U.S. stocks experienced a significant rebound at the end of the month. On April 23, the S&P 500 index and the NASDAQ index rose by 9.52% and 12.16%, respectively, marking the second-largest single-day gain in history. This rebound was partly due to market expectations of possible adjustments to tariff policies, as well as better-than-expected earnings reports from some tech giants boosting market confidence.

Although the US stock market recovered most of its losses at the end of the month, uncertainty in future policies and economic downturn risks will persist. Wall Street generally believes that this rebound may only be a "technical repair in a bear market." Several investment banks have warned investors to be cautious about this rebound, as the market still faces policy uncertainty and recession risks.

Before the Federal Reserve resumes interest rate cuts to stimulate the economy and progress is made in tariff negotiations, the short-term rebound in US stocks still faces many challenges.

At the same time, Bitcoin has performed outstandingly, redefining its position among global assets. In mid to late April, the price of Bitcoin strongly broke through the $94,000 mark, setting a new high for the year. This surge aligns with the record high performance of gold, highlighting its "digital gold" attributes. In stark contrast to the U.S. stock market, which was impacted by tariff policies during the same period, Bitcoin's volatility significantly decreased in April.

This stability has attracted medium- to long-term funds to accelerate their entry. From April 21 to 23, the net inflow into U.S. Bitcoin spot ETFs exceeded $900 million for three consecutive days, pushing the total market capitalization of global Crypto Assets above $3 trillion and reigniting bullish sentiment throughout the entire Crypto Assets market. Investor confidence rose to its highest level in over two months, with U.S. media describing it as an alternative choice in search of a safe haven. During this wave of increase, the wealth of long-term holders significantly grew. According to data, from April 1 to 23, the market value of long-term holders rose from $345 billion to $371 billion, an increase of $26 billion, indicating that the long-term holding strategy has yielded returns.

According to statistics, Bitcoin experienced a decline of over 30% from January to early April, which is consistent with historical market cycle patterns from 2013, 2017, and 2021. Typically, a pullback occurs after reaching new highs, flushing out weaker investors before resuming the upward trend. In addition, the decoupling of Bitcoin from traditional markets and the increased demand for non-correlated assets have strengthened long-term holders' confidence in Bitcoin as a store of value.

Data shows that there are currently 16.7 million BTC in profit across various wallets, a level often referred to as the "optimistic threshold." Historically, similar patterns in 2016, 2020, and early 2024 have led to bull markets. When the profitable supply remains above this area, it often boosts investor confidence and triggers sustained price momentum, usually pushing Bitcoin to new all-time highs within a few months. After Bitcoin broke through $90,000, the number of active on-chain addresses surged by 15%, and the number of large holders' wallets reached a four-month high, further validating the bullish consensus of funds.

Driven by the surge in Bitcoin prices, the total market value of global Crypto Assets surpassed $3 trillion on April 23, with Bitcoin's market value reaching $1.847 trillion, exceeding several global technology giants as well as the precious metal silver, becoming the fifth largest asset, second only to gold, Apple, Microsoft, and Nvidia.

The rise in this ranking makes Bitcoin the only digital asset in the top ten global asset list. More notably, the long-term correlation between Bitcoin and U.S. tech stocks has shown a "decoupling". During April, the price of Bitcoin surged by 15%, while the Nasdaq 100 index only rose by 4.5% in the same period, highlighting its independent market performance and changes in asset attributes. Compared to the stock market fluctuations caused by the tariff policy in April, Bitcoin has recently shown stronger price stability and lower volatility, which may encourage more listed companies to consider allocating Crypto Assets in their financial strategies.

Crypto Assets are rewriting the underlying logic of global asset pricing. The founder of an investment company has significantly raised the target price for Bitcoin in 2030 from $1.5 million to $2.4 million, based on increased institutional interest and the growing acceptance of Bitcoin as "digital gold."

At present, the market rebound in April is a temporary alleviation of concerns about market collapse and economic recession caused by tariffs. The further trend will depend on whether the trade war can be resolved in a timely manner and the trajectory of the US economy. Given that the most optimistic interest rate cuts will not occur until after January, market divergences persist, and short-term fluctuations are inevitable. When traditional financial markets are shaken by the trade war and economic cycles, the independence and counter-cyclical properties of Crypto Assets may attract more funds seeking diversified asset allocation.