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

1. Current Market Trading Situation

Market signals indicate that the 2-year U.S. Treasury yield has fallen sharply, widening the gap with short-term financing rates, while the 10-year yield has dropped below short-term rates, reflecting the market's pricing in of expectations for an economic slowdown and the Federal Reserve being forced to cut interest rates. At the same time, the inversion of long-term rates has intensified recession warnings.

Although the liquidity of the US dollar has improved, the market's risk aversion has led to capital flowing out of high-risk assets and into the treasury bond market, resulting in a contradictory situation of "liquidity easing but risk appetite contracting."

2. The Roots of Volatility in Risk Assets

Weak economic data and policy uncertainty are the main reasons for the volatility of risk assets:

1. The consumer confidence index has fallen sharply, the employment market is cooling, and coupled with potential tariff threats, concerns about a "hard landing" for the economy have intensified.

2. The development prospects of artificial intelligence are questioned, leading to a sell-off in technology stocks, especially in the computing power-related sector.

3. The cryptocurrency market is affected by a chain reaction, resulting in a contango structure in the futures market, which weakens the attractiveness of arbitrage. Coupled with ETF fund outflows, this has led to a synchronized decline of Bitcoin with the stock market, exacerbating market panic.

III. Key Competitive Points in the Future Market

The upcoming non-farm payroll data will be key in determining the strength of the "recession trade":

• If the February non-farm employment continues to exceed expectations, or if the manufacturing PMI continues to decline, it will strengthen recession expectations and push U.S. Treasury yields further down, putting pressure on risk assets.
• Conversely, better-than-expected data may temporarily restore the market's expectations for a "soft landing."

In terms of policy risk, attention should be paid to the details of potential tariff policies and the statements made by Federal Reserve officials regarding the interest rate cut path, as these factors may trigger significant market volatility.

4. Investment Strategy Recommendations

In the current market environment, it is recommended to focus on defense and wait for opportunities to counterattack. Although the cryptocurrency industry is facing selling pressure in the short term, improvements in the regulatory environment and technological innovations still support its long-term growth potential. Investors should closely monitor economic data, interest rate trends, liquidity changes, and policy movements, and adjust their investment strategies in a timely manner.

At the same time, it is recommended that investors adopt a diversified allocation, increasing the proportion of defensive assets and quantitative arbitrage products to ensure a balance between risk and return. Although short-term market sentiment is under pressure, in the long run, Bitcoin and the entire cryptocurrency industry still have ample upside potential.