Market Deep Dive: Final Flush or Base Formation?

This week has felt quieter – but not necessarily healthier. Thin liquidity, with US markets closed for Presidents’ Day and much of Asia marking the start of Lunar New Year, has left volumes lighter across the board. The result has been an uneventful lull rather than a decisive shift in tone. 

BTC is no longer cascading lower – but it is not reclaiming ground with conviction either. In this lower-participation environment, price action has drifted rather than driven. The market feels heavy, reactive, and increasingly macro-tethered. Bounces struggle to attract follow-through, dips find only tentative support, and the overall tone suggests unfinished business – as if one more proper flush may be needed before confidence can truly reset. 

With spot flows subdued and liquidity thinner than usual, it is difficult to draw strong conclusions from the grind. For now, this feels more like consolidation by absence than accumulation by intent.

Macro: Hawkish Undertones & Geopolitical Friction

Macro this week has done little to comfort risk. 

Initial jobless claims printed at 206,000, reinforcing the narrative of a labor market that is steady. There is no deterioration forcing the Fed’s hand. Front-end yields responded accordingly, firming alongside the dollar. 

Another key data point of note was the FOMC minutes – and while the Fed remains officially in wait and see mode, the undertone shifted. Several participants referenced a “two-sided” reaction function, explicitly leaving the door open to rate hikes should inflation stall above target. 

That matters. Markets had settled into a hold-then-cut framework. Instead, we were reminded that policy is conditional – and that easing is not pre-committed. Even though recent inflation prints have softened, the minutes were enough to shift sentiment. June remains the base case for a first cut (roughly ~47% probability), but yields bounced, and the dollar caught a bid on the back of the more hawkish language. 

Overlaying this is a subtle but important policy contradiction: 

• The FOMC minutes confirmed that the New York Fed checked USD/JPY levels on behalf of the Treasury last month – a signal that policymakers are closely monitoring FX dynamics 
• At the same time, the shift toward a more hawkish tone and explicit reference to a two-sided reaction function naturally supports higher yields and, by extension, a firmer dollar. 

This push-pull between FX policy preference and rate guidance is creating cross-asset friction and keeping positioning cautious. 

Geopolitics added another variable. US–Iran tensions escalated, with reports of increased US military presence and drills around the Strait of Hormuz. Oil responded accordingly, with WTI pushing back toward the mid-USD 60s as the risk premium repriced. 

The interplay between these factors may not be dramatic individually, but together they matter. A firmer dollar, yields drifting higher, and oil prices pushing up collectively tighten financial conditions at the margin. That does not constitute a shock to the system, but it does incrementally reduce liquidity and risk appetite – enough to keep markets cautious.

Crypto: Rangebound with Fragile Conviction

As we head into the weekend, BTC is hovering just above USD 68,000, up modestly on the week +2.8%, while ETH remains below USD 2,000 and broadly flat on the week. The panic phase has clearly passed, but what has replaced it is not strength – it is inertia. 

There remains a lingering sense that the market may want to revisit the USD 60,000 recent lows. Many participants would feel more comfortable leaning into topside exposure after a controlled retest in a lower-volatility environment. A calm sweep of prior lows often builds stronger foundations than a violent capitulation – particularly if leverage has already been materially reduced. 

Flows reinforce the idea of fragility beneath the surface. According to Glassnode, the average US spot BTC ETF cost basis sits just under USD 84,000. With the average ETF entry price sitting well above current spot, a large portion of ETF investors are currently holding unrealized losses. That positioning creates vulnerability – if price accelerates lower, it increases the probability of reactive selling as holders seek to limit further drawdowns. 

At the same time, market dynamics continues to evolve. CME’s decision to move regulated crypto futures and options to 24/7 trading will likely compress weekend gaps over time, but it may also introduce new volatility dynamics during traditionally thinner hours as liquidity providers recalibrate risk continuously. 

In this environment, headline price action tells only part of the story. The more useful signals lie beneath the surface – whether ETF flows begin to stabilize, how funding behaves relative to basis, and whether open interest rebuilds constructively rather than mechanically. With dollar positioning already stretched and oil reacting to geopolitical developments, crypto remains highly sensitive to broader macro currents. 

For now, the market is grinding rather than breaking – but participation is light and conviction remains fragile.

Looking Ahead: Catalyst or Continuation?

As we head into the weekend, today’s macro docket is anything but light. Core PCE – the Fed’s preferred inflation gauge takes center stage, alongside Q4 GDP and the latest Manufacturing and Services PMIs. In a market already sensitive to policy tone, any surprise in inflation or growth could quickly reprice rate expectations and ripple through risk assets. 

Nonetheless, the core debate remains straightforward: is this extended grind forming a base, or merely marking time before another leg lower? 

A renewed escalation in US–Iran tensions or a broader equity de-risking wave would likely pull crypto lower irrespective of improving internal positioning. 

That said, if price were to revisit the USD 60,000 region in a more orderly fashion – with volatility contained and leverage lighter – it would likely strengthen confidence that a more durable floor is forming. Until then, the range persists, and the market still needs to prove that stabilization is more than just a pause in selling pressure.

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