What does it really mean to understand crypto macro?
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What does it really mean to understand crypto macro?
Understanding macro is not just about assessing markets, but also about finding direction amid uncertainty.
Navigating Web3 tides with focused insights"When the market has no room left to retreat
is when macro is discussed more."
I often hear: "Those who focus on macro don't make money." This kind of prejudice usually arises when fundamental analysts make definitive calls at a certain point in time, only for the market to move sharply against them—prompting others to mock those macro analysts for being proven wrong.
Why does this happen?
At its core, it's a mismatch between macro expectations and timeframes—long-cycle market forecasts cannot be applied to short-term entry and exit decisions. Predictions about six-month or one-year price movements are based on past assumptions and biases. Black swan events such as financial crises or pandemics are neither predictable nor avoidable.
01 Does crypto even need macro analysis?
Two data points: At the end of the 2021 bull run, the Fed’s dot plot reached the peak of the previous cycle; in March, after the release of the Fed’s dot plot, Bitcoin dropped below $70,000.
Now, due to the lack of new narratives, the market has handed over its narrative power to external macroeconomic factors, with liquidity becoming a widely discussed topic. We’ve noticed that since the introduction of Bitcoin ETFs, we’re compelled to pay attention to this powerful new buyer. From a trading perspective, this has clearly increased the difficulty of trading. Changes in market capital structure—especially the influx of professional institutional capital—have caused prices to frequently anticipate macro expectations ahead of time, leading to deviations from on-chain fundamentals.
This shift creates confusion in trading, but our foundation lies in the gradual convergence between macro and reality over time. Finding resonance at the margin between fundamentals and macro allows our views to carry higher win rates.
02 Simplifying Macro Analysis
Macro may seem complex and intimidating, but it can be distilled into four key aspects:
1. Rhythm
2. Fundamentals
3. Correlation Analysis
4. Event-driven Logic
1. Rhythm: Includes economic data (e.g., unemployment rate) and inflation data (e.g., CPI). The Federal Reserve regularly releases these figures monthly and uses them to shape monetary policy, hence the term "rhythm." For example, if CPI gradually declines and non-farm payroll growth slows in the first half of the year, it suggests inflation is under control and the economy may be entering a weaker phase—making two rate cuts within the year highly likely.
2. Fundamentals: First, real-world on-chain usage (active addresses, new addresses, gas fees). High activity levels and reasonable transaction costs typically indicate healthy market dynamics, forming the foundation for a bull market. Second, funding-side buying power (offshore Bitcoin ETF inflows, on-exchange stablecoin flows). Capital inflows are the direct engine driving price increases in zero-sum markets. Third, behavior of major market participants (long-term holders, short-term traders, exchanges, miners). These groups exhibit different behaviors across cycles—for instance, every bull run features long-term holders distributing holdings while short-term traders absorb supply. A new major uptrend often follows a mining crisis, requiring a reshuffling of the mining landscape.
3. Correlations: U.S. equities, U.S. Treasuries, and the U.S. Dollar Index. The Nasdaq Composite (IXIC), a risk asset like Bitcoin, tends to move positively with BTC. U.S. Treasuries act as a market "siphon," competing with Bitcoin for capital—thus exhibiting a negative correlation. The U.S. dollar serves as the foundational leverage; a stronger dollar index passively increases margin requirements and debt repayment costs, potentially causing financial stress or default risks.
4. Event-driven Logic: Placed last, yet often most critical. Fragmented events require post-market validation of their impact and must be weighted accordingly. For example, the ETF approval brought in ~$10 billion in external capital, acting as a key catalyst for the first-half bull run. In contrast, minor security breaches or hacking incidents may only draw localized attention and have limited overall market impact.
03 The Lagging Nature of Macro
Analysis of the above macro indicators/events is often retrospective and prone to path dependency. Even high-probability statistical approaches tend to lag. Industry professionals continually ask: Can we identify leading signals to get ahead of the curve?
It's difficult.
Because once the market reaches a consensus expectation, the price has already reflected it ("priced in"). If there's no consensus, the factor being analyzed is likely irrelevant. From a trading standpoint, this means following trends rather than betting heavily on reversals—traders typically catch the "body" of the move, not the very beginning ("fish body" vs. "fish head").
What research can do is assess whether the market has diverged from underlying realities—whether assets are overvalued—and identify opportunities in the gap between price and fundamentals, positioning oneself as part of the market correction force. The past is the foundation of the future; the present shapes its direction. Research progresses through repeated predictions, verification and falsification, ultimately driving transformation, collapse, and reconstruction of analytical frameworks.
04 Market Outlook Under Current Macro Conditions
The U.S. economy remains strong. Despite rate cut expectations, monetary conditions remain tight with elevated interest rates. Non-farm employment data shows no sign of weakening, and CPI continues to trend toward the 2% target—but still remains above 3%. Crypto fundamentals are weak: over half of Ethereum’s activity has shifted to Layer 2 networks, which consume only 1.5% of Ethereum’s total gas fees. In simple terms, 50% of demand generates just 1.5% of revenue. Both new and active addresses have declined to yearly lows alongside falling prices. Since Bitcoin entered consolidation, the bull market has stalled into an odd stillness—market participants are unwilling to sell, holding out for higher prices. However, signs of capitulation are now emerging among short-term holders and miners.
In terms of correlations, both U.S. equities and the dollar index are strengthening. With T-bill supply surging, capital is favoring stocks over crypto. The crypto market is effectively feeding capital into Nasdaq—NVIDIA surged nearly 150% in the first half, triple Bitcoin’s return. Amid liquidity tightening, AI-related stocks are preferred over highly volatile cryptocurrencies. In the absence of new narratives, competition between stock and crypto markets outweighs spillover benefits.
With a wave of high-FDV VC tokens set for large-scale unlocking in the second half, the market will need fresh buying power—or a pullback to unlock existing capital:
Scenario 1: Innovation in use cases or systems, coupled with a strong breakout narrative, drives inflows of external capital, pushing Bitcoin’s market dominance to new highs.
Scenario 2: Bitcoin trades below $56,000 (breaking three cost levels): short-term holder cost basis, miner shutdown price, and long-term ETF holder cost basis. A sharp price decline clears out weak hands, consolidating stablecoins and purchasing power within the market. Within three months, a positive event reignites investor sentiment, restarting the bull market and replicating the second peak seen in 2021. However, if this period drags on too long, confidence may erode, preventing bullish forces from overcoming bearish sentiment—leading the market into a full-blown bear phase.
Final Thoughts
The market now has nowhere left to retreat, prompting widespread discussion of "macro." It demands looking beyond short-term volatility to uncover deeper trends and structural shifts. But it’s crucial to recognize that macro analysis is inherently complex—no single indicator or event can fully determine market direction, and macro itself has limitations. Understanding macro isn’t just about predicting markets; it’s about finding direction amid uncertainty.
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