The Fed's hawkish dot plot signals liquidity concerns for the second half of the year, with Bitcoin entering the final clearing phase of a cyclical bear market | Bitcoin | Research Report | Cryptocurrency Market Analysis | Late-stage Bear Market

During the reporting period (June 14–20), $Bitcoin (BTC.CC)$ Bitcoin opened at $64,425 and closed at $64,223, down slightly by 0.31%, with a weekly volatility of 7.92% and trading volume contracting further.

The global macro-financial environment has tightened significantly following the new Fed Chair’s policy debut and the hawkish dot plot revision. Fed net liquidity sharply declined by 2.19%, while the US Dollar Index rose strongly by 1.10% to 100.85, further cementing financial conditions as 'restrictive' and exerting notable valuation pressure on Bitcoin, a long-duration asset.

Within the market, the transmission channel from macro tightening to crypto has been confirmed. Institutional Bitcoin ETFs recorded net outflows of $224 million, causing Bitcoin prices to trade in a range below multiple moving averages, closing the week down slightly by 0.31% at $64,223.

Short-term long and short positions continued to be liquidated, while multi-cycle long positions and whale holdings expanded further, indicating that the cyclical bear market is still progressing ruthlessly.

With inflation rebounding again and the Fed shifting its policy stance—followed by rate hikes from the EU and Japan—we assess that Bitcoin is now entering the most challenging phase of this cycle: the late stage of a cyclical bear market.

Macro Financial Conditions

This week, underlying liquidity in the global financial system showed marked contraction. As a core liquidity indicator, Fed net liquidity dropped sharply by 2.19% compared to last week, signaling an accelerating impact from the Fed’s active withdrawal of funding. The Secured Overnight Financing Rate (SOFR), which reflects supply-demand dynamics in short-term wholesale funding markets, edged down slightly to 3.63%, suggesting that while medium- to long-term liquidity is being withdrawn, marginal conditions in short-term money markets remain relatively stable.

However, the substantive tightening on the policy front is now unavoidable. At the June 17 FOMC meeting, the Fed—under new Chair Kevin Warsh—opted to keep the federal funds rate unchanged at 3.50–3.75%, but the updated dot plot revealed a strongly hawkish stance, raising the median rate projection for end-2026 to 3.75–4.00%. According to eMerge IS, financial conditions clearly entered a 'tightening' regime this week.

Spurred by the Fed’s hawkish repricing, interest rates and exchange rates exhibited pronounced risk-off and tightening characteristics. This week, nominal yields on 2-year and 10-year US Treasuries held flat, closing at 3.62% and 4.49%, respectively, reflecting the market’s recalibration toward a 'higher-for-longer' rate path. Meanwhile, the US Dollar Index surged 1.10% to 100.85, directly compressing valuation space for non-USD, zero-coupon, high-beta crypto assets. On the inflation and labor fronts, unemployment stood elevated at 4.30%, CPI year-over-year came in at 4.20%, core CPI at 2.90%, and PPI reached 6.50%. Meanwhile, PCE (0.40%) and core PCE (0.24%) changes further confirmed persistent inflation stickiness. Although the three major US equity indices posted modest gains due to prior sentiment momentum (S&P 500 up 0.93%; Nasdaq up 2.43%; Dow Jones up 0.71%), their divergence from underlying liquidity contraction reveals partial blockages in transmission mechanisms, creating tangible headwinds for Bitcoin.

Crypto Market

During this reporting period, Bitcoin exhibited classic range-bound trading and position turnover characteristics. Coinbase’s weekly open was $64,425 and weekly close was $64,223, down slightly by 0.31%, with a weekly range of 7.92%. The current price trades below the 30-day moving average ($67,742), 90-day moving average ($72,514), and 200-day moving average ($76,785), representing a 51.20% drawdown from the cycle high. Concurrently, spot liquidity contracted significantly, with 7-day average trading volume falling to 76,726 BTC—a decline of 23,385 BTC (or 23.36%) from the prior week. On the margin funding side, institutional Bitcoin ETFs recorded $224 million in net outflows, while stablecoin liquidity remained broadly flat, with weekly supply increasing marginally by $4.19 million. External marginal capital flows turned negative.

From the perspective of trading venues and derivatives structure, the crypto market is undergoing a typical deleveraging phase, with trading dynamics characterized by spot-driven and hybrid-driven activity. This week, exchange Bitcoin balances declined by 3,648.66 BTC, with net outflows from exchanges totaling 4,020.39 BTC, indicating continued accumulation of spot holdings off-exchange.

In terms of on-chain profit-and-loss dynamics and holder behavior, overall market profitability pressure has increased, exhibiting characteristics of holding in观望 (wait-and-see mode) and accumulation at lower price levels. The aggregate MVRV ratio has declined to 1.20 (a weekly change of -0.03), sitting near the bottom of its historical range of 1.13–2.29, reflecting weakening overall market profitability. Long-term holder (LTH) MVRV slightly decreased to 1.29, while short-term holder (STH) MVRV dropped to 0.90, indicating that short-term holders are facing significant unrealized losses. However, short-term holders have not panicked into selling off, as the STH SOPR remains at 1.00; meanwhile, LTH SOPR fell to 0.87, signaling continued deterioration in long-term holder sell-offs within the current cycle.

In the derivatives market, leverage levels have notably retreated: open interest declined to $55.20 billion, down $23.10 billion (-4.02%) week-over-week; funding rates slid to 0.00%, indicating cooling bullish leverage sentiment. Although perpetual contract trading volume reached $210 billion during the week, the 7-day average derivatives trading volume dropped to $30.1 billion, a decrease of $4.55 billion (-13.14%) from the prior week. Total liquidations for the week amounted to $2.67 billion, with $196 million from long-side liquidations and $193 million from short-side liquidations. The concurrent objective contraction in both derivatives contract size and trading volume suggests that high-leverage positions are being steadily unwound and cleared.

Market Implications

Integrating global macro dynamics with crypto market structure clearly outlines a complete causal transmission chain: 'macro tightening → risk-off capital outflows → spot accumulation by long-term investors → price support through consolidation.'

First, the transmission channel from macro tightening to the crypto market has been 'confirmed.' The Fed’s net liquidity contracted significantly by -2.19%, combined with the dot plot raising the median projected rate for 2026 to 3.75%–4.00%, alongside a 1.10% surge in the US Dollar Index, prompting macro-driven capital to retreat into risk-off positioning. This shift directly impacted institutional asset allocation, reflected in Bitcoin ETFs recording $224 million in net outflows over the week, exerting tangible downward pressure on BTC prices.

Second, regarding market drivers and interrelationships, this week exhibited clear 'divergence and offsetting' dynamics between macro factors and the crypto market. Despite evident 'headwinds' from macro conditions and institutional channels, strong 'spot-driven' forces within the crypto market demonstrated remarkable resilience. A net outflow of 4,020.39 BTC from exchanges and an increase of 40,303 BTC in long-term holder balances formed robust spot absorption capacity, counterbalancing the valuation downside pressure caused by ETF outflows and a stronger dollar index. As a result, prices dipped only modestly by 0.31% for the week, avoiding systemic collapse.

Finally, the crypto market is currently in a healthy phase characterized by overlapping 'accumulation' and 'deleveraging.' Open interest declined from $57.5 billion to $55.2 billion (-4.02%), and funding rates have reset to zero, indicating that highly leveraged speculative capital has largely exited. Meanwhile, short-term holders have refrained from panic selling amid unrealized losses, while long-term holders are actively accumulating at lower prices during this consolidation range, strengthening the overall supply structure. Both short- and long-term holder capitulation has temporarily improved, with buying interest around the $60,000 level absorbing sell pressure and stabilizing prices above $60,000.

Outlook for the Market Ahead

Given the current macro tightening environment and crypto market deleveraging trend, Bitcoin’s medium-to-short-term trajectory will primarily depend on shifts in economic and employment data, as well as changes in macro liquidity expectations:

On June 25, the U.S. May PCE price index and Q1 GDP final reading will be released. Against the backdrop of the dot plot signaling one more rate hike in the second half of the year, if PCE data comes in worse than expected—reinforcing persistent rate-hike expectations—risk assets will face further pressure, potentially breaking below the $60,000 support level.

On June 26, the University of Michigan’s final June Consumer Sentiment Index will be published. The key focus will be on long-term inflation expectations; any upward revision would reinforce the Fed’s hawkish stance and prolong the liquidity tightening cycle.

Secondly, the price trajectory hinges on market acceptance of the $60,000 support level and the ongoing liquidation pressure from single-cycle long-term holders. Currently, long-term holders are sitting on a 23% unrealized loss, with single-cycle long-term holders experiencing even deeper drawdowns. In the late stage of a cyclical bear market, the forced exit of single-cycle long-term holders typically drives major market moves. Although their selling activity has slowed, it continues, requiring additional capital willing to absorb this selling pressure near $60,000. If this selling cannot be fully absorbed, prices may undergo another round of downward rebalancing.

The above analysis is provided by EMC Labs.

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About EMC Labs

EMC Labs is a partner of Victory Securities, and together they have launched the only virtual asset fund approved by the SEC to accept stablecoin subscriptions—the Victory EMC BTC Cycle Fund. EMC Labs was co-founded by seasoned virtual asset investors and data scientists, with a core team hailing from JD.com Finance, Bell Labs, Marsbit, and other companies. EMC Labs has invested substantial resources in building a professional engine to analyze Bitcoin’s on-chain data and technical indicators.

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