Market Trading Logic Analysis: Expectations of Economic Slowdown Dominate, Stagflation Risks Emerge

Current Market Trends

Market signals for interest rates show that the 2-year U.S. Treasury yield is rapidly declining, with the SOFR spread widening, and the 10-year yield has fallen below the SOFR rate. This reflects that the market is pricing in an economic slowdown in advance, anticipating that the Federal Reserve may be forced to cut interest rates. Meanwhile, the inversion of long-term rates has strengthened recession warnings.

Despite a marginal improvement in US dollar liquidity due to the consumption of TGA accounts, market risk aversion has led to a withdrawal of funds from high-risk assets and a surge into the treasury market. This has created a contradictory situation of "liquidity easing but risk appetite contracting."

Roots of Volatility in Risk Assets

1. Weak economic data: The consumer confidence index has dropped significantly, the job market is cooling, and potential tariff threats are increasing market concerns about a "hard landing."

2. AI Narrative Hit: The controversy over "Scaling Law Failure" sparked by Nvidia's financial report, combined with the iteration of AI technology, has led to market doubts about the commercial viability of AI, resulting in a sell-off of tech stocks, particularly in the computing power sector.

3. Chain Reaction in the Crypto Market: The CME futures have entered a backwardation structure, reducing the attractiveness of arbitrage. Coupled with the outflow of ETF funds, Bitcoin has fallen in sync with U.S. stocks, and market panic is evident.

Future Key Points of Contest

Recent non-farm data will be key in determining the strength of the "recession trade." If February's non-farm employment continues to exceed expectations, or if the manufacturing PMI continues to decline, it will reinforce recession expectations and push U.S. Treasury yields further down, placing pressure on risk assets. Conversely, better-than-expected data may temporarily restore the "soft landing" expectations.

In terms of policy, potential details of tariff policies and statements from Federal Reserve officials regarding interest rate cuts may trigger significant market fluctuations.

Investment Strategy Recommendations

Currently, the focus should be on defense, waiting for an opportunity to counterattack. The short-term selling pressure in the cryptocurrency industry mainly comes from the withdrawal of leveraged funds, but improvements in the regulatory environment and technological innovation still support its long-term growth potential.

Investors are advised to remain cautious before market expectations become clear, and it is not advisable to chase high prices. If risk appetite stabilizes, a short-term corrective market may occur, but volatility risks should still be monitored.

To respond to the highly uncertain market environment, it is recommended to diversify allocations, increase defensive assets and quantitative arbitrage products to ensure a balance between risk and return. At the same time, closely monitor economic data, macro interest rates, liquidity changes, and market expectation adjustments brought about by policy trends.

Despite the short-term market sentiment being dampened, the continued easing of U.S. policies and regulatory environment provides long-term growth momentum for the cryptocurrency industry. The short-term market fluctuations mainly reflect the risk-averse behavior of funds in an uncertain environment, particularly triggered by risk management measures of leveraged and short-term funds. From a long-term perspective, Bitcoin and the cryptocurrency industry still have ample upside potential and development opportunities.