Where are the opportunities in BTC? $36,000

This month, the market has been oscillating within a range, reaching a high of 74,000 this week. In my article on February 9, I mentioned several points:

1. The closer to 75,000, the higher the cost-effectiveness of shorting;

2. Around 70,000, it’s not recommended to go long; look for positions to short.

Currently, these two points still seem like reasonable advice. During this month of fluctuation, BTC has provided multiple good opportunities for long-term short entries. Of course, this week has been the best opportunity.

Today’s article will not focus on technical analysis or share specific levels. Instead, I want to share my outlook on BTC’s future trend from a fundamental perspective. If you want to see the conclusion directly, jump to the end of the article.

1. Recent Market Review

Since the US-Iran conflict began on February 28, BTC experienced a complex wave of movements, completing a rapid and significant fluctuation of decline-rebound-decline within less than a week, with various logical factors successively taking control of the market.

1. Liquidity shock after the sudden outbreak of war. This led to risk-averse trading, selling off all high-volatility assets. On February 28, BTC quickly dropped after the war started. This is event-driven trading; BTC at this stage and the next behaved as a high-beta, high-leverage risk asset.

2. The market shifted from panic over “will the war spiral out of control” to trading “maybe it won’t spiral out of control soon.” In this context, although oil prices rose, the market bet on a controllable conflict with diplomatic outlets, leading to large-scale short covering. Risk assets rebounded, and BTC quickly changed from being sold off to one of the most elastic and fastest-rebounding risk assets. Even on the day the Strait of Hormuz was announced to be blocked, BTC only experienced a brief correction before resuming its upward trend, reaching 74,000 at one point.

3. However, with the confirmation of substantial blockade of the Strait of Hormuz on March 5, the market began trading inflation expectations. Due to soaring oil tanker premiums and the expiration of insurance coverage on March 5 without renewal, oil tanker transportation through the strait was effectively interrupted. The market shifted to trading “higher inflation → fewer rate cuts → stronger dollar → higher real discount rates,” causing BTC to come under renewed pressure and start a correction.

In just a few days, BTC experienced two major swings because market logic kept switching, and the dominant pricing power kept shifting among different groups.

2. What is the market trading now?

So far, what is the market trading? Let’s look at the performance of some key assets:

1. WTI crude oil broke through 90, surging. The market is beginning to price in “oil and gas supply disruptions” as not being resolvable in the short term.

2. Gold rose slightly. Geopolitical conflicts are bullish for gold, but a strong dollar and rising US Treasury yields are bearish. The combined effect led to a modest increase in gold, not a significant surge due to geopolitical tensions.

3. Copper dipped slightly. This indicates the market believes that rising oil prices, which increase costs, will suppress demand expansion, making the world more fragile. But there’s no sign of a recession trade yet.

4. US Dollar Index rose. This shows the market’s recognition of dollar liquidity, with funds flowing into USD, reflecting concerns about re-inflation and safe-haven demand.

5. US Treasury yields increased. This suggests the market believes cost shocks will push inflation higher again, and the Fed may keep interest rates high for longer (“higher for longer”).

6. US stocks declined. Rising Treasury yields mean higher discount rates, which will suppress the performance of long-duration assets and high-valuation sectors.

Looking at these main assets, the market has not yet entered a “recession” trading phase. Currently, it’s trading on the premise that “inflation shocks may increase recession probability.” The specific logical path is:

War/blockade risk → Oil & gas supply disruption → Energy prices rise → Inflation path elevates over the coming months → Rate cut expectations retreat / higher for longer → Real interest rates and financial conditions tighten → Consumption, manufacturing, and profits face pressure → Future growth declines, recession probability rises.

Among all these links, the most critical is: oil prices. If oil remains high or even rises further (which I believe is highly probable), this trading path will only strengthen. Under this scenario, BTC has no chance. As a risk asset, BTC fears the tightening of real interest rates and financial conditions.

Additionally, keep an eye on US Treasury yields and the dollar. If both fall sharply, it indicates the market is just reacting to short-term geopolitical sentiment.

3. Does BTC have a chance in an inflationary environment?

Some may ask again: since BTC has always been touted as an inflation hedge, shouldn’t it benefit from inflation?

In reality, this is an inaccurate statement. A more precise view is that BTC’s long-term narrative is “resistance to currency dilution,” not “a stable hedge against inflation.”

Fiat currency can theoretically be infinitely issued over a long cycle, leading to a continuous increase in prices over the long term, which means the value of fiat is constantly being diluted. BTC has a cap of 21 million coins; as fiat is diluted, BTC should appreciate. This has been BTC’s core narrative for a long time.

However, price increases correspond to actual CPI inflation that has already occurred. The market is trading at least two other types of inflation expectations: future inflation expectations and policy responses triggered by inflation (such as rate hikes, balance sheet reduction, a stronger dollar, etc.).

BTC’s long-term narrative only corresponds to super-long-term CPI inflation. In the medium and short term, BTC’s reaction to the other two types of inflation trading is much more significant than the former. High inflation → tighter monetary policy → worse liquidity → BTC declines.

BTC is primarily a high-volatility financial asset, and only secondarily an “experimental currency.”

More importantly, even if BTC’s narrative is resistance to fiat dilution, it requires a “sufficiently long observation window,” such as 5 or 10 years, rather than a few weeks or months. That’s why we see BTC’s lows continually rising and highs also rising over time, but with still significant fluctuations in between.

4. Conclusion

Currently, the blockade has lasted less than a week, and the market is not overly pessimistic. There may even be some small rebounds next week. But if by the end of next week there’s still no sign of easing, the previously mentioned trading path will enter a self-reinforcing stage, making BTC even more vulnerable.

If the blockade remains unresolved next week, then over the next few weeks to 1-2 months, the only chance for BTC to rise is after the blockade of the Strait of Hormuz is resolved, allowing risk assets to undergo a corrective rebound.

However, this would only trigger a rebound, because as the blockade duration lengthens, rising oil prices will inevitably impact future inflation data. The shorter the blockade, the smaller the impact; the longer it lasts, the greater the impact, and the more tightening the financial environment will become.

As for whether a liquidity crisis might occur due to excessively high oil prices, the current judgment is that it’s unlikely unless Iran goes completely crazy. Iran’s best strategy now is not to attack every oil tanker but to demonstrate its blockade capability, causing oil tankers to avoid passing through the strait due to insurance premiums. By prolonging the blockade and raising oil prices to between 90-120, Iran can make the US, its allies, and the East feel the pain but not to the point of unacceptable levels, thus pressuring the US to stop attacking and gaining negotiation leverage. If Iran’s aggressive actions cause oil prices to spike excessively, it could lead to multi-national joint escort missions and intense bombing of Iran, which would be counterproductive.

Of course, if the situation unexpectedly leads to a liquidity crisis due to uncontrollable oil prices, then the opportunity to “pick up the pieces” will also arise.