The background for 2026 is: a labor market that remains relatively soft (February employment report was weak), inflation that is only mildly elevated (not out of control), and limited room for fiscal stimulus. In this context, the Federal Reserve faces a stagflation dilemma—inflationary pressures prevent rate cuts, but a weak economy does not support rate hikes. The eventual outcome may be: the Fed staying on hold longer instead of raising rates; if the economy weakens further, they may be forced to cut rates.

Therefore, the bottom for BTC might be higher than expected, and the bottom will likely appear at a point when the Fed is forced to turn dovish: a significant rise in unemployment (for example, over 5%), or a stress event in a credit market (such as a sharp widening of HY OAS) that compels the Fed to make a statement. This could happen in June or in Q3-Q4.

I am waiting for such a crisis event to occur. Overall, the depth of this BTC correction may not be as severe as previous cycles—the core reason being that the Fed’s policy space itself is asymmetric: the economic background in 2026 does not support sustained large rate hikes, and the extent of liquidity tightening has a ceiling. Once economic data deteriorates enough, the Fed may be forced to turn dovish faster than market expectations, which means the duration and depth of this bear market will be constrained by the policy floor.