Matrixport Research: Although global liquidity has improved, caution is still needed in facing market risks

As the dollar weakens, liquidity indicators rebound, and inflation data shows marginal improvement. Despite these positive changes, MEME Coin, which was once one of the strongest narratives of this bull market, continues to perform poorly, seemingly showing no signs of recovery.

Inflation Pressures Lead to Global Market Reactions

The strengthening of the U.S. labor market led to a peak in the altcoin market in early December 2024. In mid-December 2024, after Federal Reserve Chairman Powell indicated that interest rates might remain unchanged due to inflation pressures from the Trump administration's tariff policies, BTC entered a consolidation phase. Although the Fed expects tariffs to have some inflationary impact, the aggressive and rapid implementation of tariffs by Trump exceeded most economists' expectations, triggering a chain reaction in the stock and crypto markets.

Despite this week's U.S. inflation report being slightly better than expected, it failed to provide much comfort. Ongoing uncertainty surrounding trade policies continues to make the market pessimistic about the likelihood of the Fed taking easing measures in the near term.

Clear Consolidation for MEME Coin, Significant Decline in Pump.fun Revenue

For MEME Coin, signs of consolidation are very evident. Since February, the price of Raydium (a liquidity provider for the Solana-based automated market maker and Serum decentralized trading platform) has plummeted by 71%, while Solana itself has dropped by 37%.

Pump.fun is a decentralized trading platform (DEX) based on the Solana blockchain, which has become a popular platform for traders to quickly launch, discover, and speculate on meme coins. The platform supports the rapid creation and trading of tokens, often leading to extremely volatile market activity. Over the past 12 months, the Pump.fun platform has generated over $582 million in revenue, making it one of the most profitable crypto projects of this cycle. However, its revenue growth has recently declined sharply.

Weakness in the Altcoin Market, Market Funds Become More Cautious

The weak momentum in the altcoin market in December, along with the burst of the MEME Coin bubble in January, has collectively led to a $1 trillion decrease in the cryptocurrency market capitalization—from $3.6 trillion to $2.6 trillion. This redistribution of wealth may cause investors to remain cautious about further investments, resulting in a rebound driven by better inflation data being extremely limited. The closure of fully realized arbitrage positions by hedge funds has been a major driver of recent selling pressure. This anticipated selling has largely been completed and may now be approaching its peak intensity.

Disclaimer: The market is risky, and investment should be approached with caution. This article does not constitute investment advice. Trading in digital assets can involve significant risks and volatility. Investment decisions should be made after careful consideration of personal circumstances and consulting financial professionals. Matrixport is not responsible for any investment decisions made based on the information provided in this content.