PANews reported on June 3rd that Chloe (@ChloeTalk1), a columnist for HTX DeepThink and a researcher at HTX Research, analyzed that the core contradiction in the current crypto market is not whether the rise in US stocks can drive up cryptocurrencies, but rather the obvious split in risk appetite emerging in the market. US stocks, especially in the AI chain, remain strong, with funds continuing to chase narratives related to AI computing power, servers, chips, and infrastructure; however, BTC and ETH are clearly under pressure, indicating that the current situation is not entirely risk-on, but rather that funds are concentrated in US AI assets with greater certainty, while withdrawing from highly volatile and liquid crypto assets.
Considering Warsh's proposed reforms to the Federal Reserve system, the pressure on the crypto market leans more towards "tightening liquidity expectations" than simply interest rate pressure. Warsh hopes that by reducing the balance sheet, the Fed will shift from relying on its balance sheet to regulate the market back to a traditional framework centered on interest rates. This means the market needs to reprice the liquidity premium brought about by QE over the past decade. The valuations of BTC, ETH, and altcoins largely depend on dollar liquidity, leverage, and risk appetite expansion. Once the market believes the Fed will aggressively reduce its balance sheet, crypto assets could easily switch from a "rate cut trade" to a "balance sheet reduction trade." The current strength of US stocks cannot fully offset this risk: the rise in US stocks is more driven by AI profit expectations and industrial capital expenditure, rather than broad dollar liquidity expansion. In other words, US stocks are rising due to AI fundamentals, while crypto is falling due to liquidity expectations; the divergence of "US stocks hitting new highs while crypto falls" is not contradictory.
In the short term, the key range for BTC is around $67,000-$69,000. If it can regain $70,000, the market may view it as a technical rebound following short-term deleveraging; if it breaks below $67,000 with significant volume, it may further test $65,000. After ETH fell below $2,000, risk appetite for altcoins will weaken, and funds are more likely to remain in BTC, stablecoins, or the US AI stock theme, rather than spreading to high FDV altcoins.
Overall, the crypto market is experiencing weak and volatile trading, with key variables being US Treasury yields, ETF inflows, and the Federal Reserve's statements regarding the pace of balance sheet reduction. If yields fall, the dollar weakens, and ETF funds flow back in, BTC may see a defensive rebound; however, if yields rise again and expectations of balance sheet reduction intensify, the crypto market will remain under pressure. The current environment is more akin to a "defensive rebound" than the start of a new bull market. BTC is relatively stronger than ETH, and ETH is relatively stronger than most altcoins. High FDV, low-income projects will face a more significant liquidity discount.
Note: The content of this article is not investment advice, nor does it constitute an offer, solicitation of an offer or recommendation for any investment product.
