Organization & Compilation: Deep Tide TechFlow

Guest: Sean Farrell, Head of Crypto Research at Fundstrat

Host: Zack Guzman

Podcast Source: Coinage

Original Title: Why The Analyst Who Called Crypto's Crash Is Still Cautious

Broadcast Date: March 18, 2026

Summary of Key Points

Although many investors believe that Bitcoin and other cryptocurrencies have bottomed out, market volatility and the ongoing uncertainties of the Iran war have led some analysts to take a reserved view of this optimism.

Fundstrat analyst Sean Farrell, who accurately predicted the market crash in February this year, shared his views on the risks of Bitcoin and the crypto market in an interview with Coinage. He explored the potential future trends of Bitcoin, factors that might influence risk assets, and why his cautious stance on the crypto market remains unchanged. Additionally, he analyzed the cross-asset growth potential of Hyperliquid, deeming it one of the most intriguing protocols in the current crypto space.

Highlights

Market Timing and Positioning: A 'Tug-of-War' for Traders

• The market at the beginning of the year exhibited extreme positioning, with low volatility but unusually active trading in risk assets. Coupled with miners selling at all costs, I determined that there wasn't much good risk-reward space in the first half of the year.
• The current market is not in a clear trending direction and remains a typical trader's market. It is wiser to keep some cash available as the market rises.
• The 30-day moving average of funding rates has turned negative, which typically indicates that the market is approaching a more stable bottom. However, I expect a difficult adjustment period before we see a turnaround by the end of the year.

Institutional Play: The Vacuum of 'Supportive Buying' Behind Saylor's Purchases

• Although large institutions injecting liquidity into the market is positive, the issue is that once these spot purchases stop, the market may lack enough 'supportive buying' to absorb it, increasing short-term volatility risk.
• Many alternative asset management firms have seen their stock prices get hit, and if credit spreads start to soar, it will have a lagging but deadly impact on risk assets like the crypto market.

Top Alpha Target: The Paradigm Shift of Hyperliquid (HYPE)

• Hyperliquid is one of the most attractive targets in our portfolio. In the 15 days prior to March, its HIP-3 market trading volume reached $28 billion, driven by user demand for trading gold and oil contracts amid global macro turmoil.
• The 90-day correlation between HYPE and Bitcoin is only about 0.4 (typically crypto assets are close to 1). This low correlation makes it an important supplement for constructing a crypto investment portfolio.
• The target price we set for HYPE is around $100, which still has significant upside compared to the current price (around $40).

Macro Risk Deep Waters: The Negative Correlation of Private Credit and AI

• I am most concerned about the pressures in the private credit market. Many funds have been forced into redemptions and have marked down valuations. Credit spreads are widening, and if we wait until they fully soar before acting, it will be too late.
• Many private credit targets are software companies, and the rapid development of AI could reduce their terminal value, impacting their credit quality—this pressure could spill over into the crypto market.

Regulation and Federal Reserve: Uncertain Catalysts

• The strong opposition from banking lobbyists and the prolonged controversy surrounding stablecoin yields have made the prospect of passing the bill unclear. This battle is proving to be longer than anticipated.
• Investors should pay close attention to whether the Federal Reserve will push the rate cut expectations to 2027. If this happens, it will amplify the current war risk premium and negatively affect asset prices.
• I am waiting for a 'capitulation-style liquidation.' If the price can break through key moving averages again, and if CME open interest increases, I will be more confident to increase my investment.

Long-Term Vision: Target Price Remains Unchanged

• Despite my short-term caution, I have no plans to adjust the target price of $115,000 by year-end; favorable factors may manifest in the second half of this year.

Sean Farrell on "Predicting the Crypto Market Crash"

Zack Guzman: Welcome to the new episode of "Coinage." It is great to have our guest again—Sean Farrell, Head of Digital Asset Strategy at Fundstrat.

You were on our show earlier this year, successfully anticipating that market downturn. Now Bitcoin seems to be experiencing a rebound, yet the market remains volatile. I've noticed you recently released a cautionary report, especially concerning certain sectors of the crypto space. Could you share your thoughts on the current market volatility and how it affects the cryptocurrency market?

Sean Farrell:

I want to revisit the situation at the start of the year when I was very cautious about the market. The market conditions showed extreme positioning, with low volatility but unusually active trading in risk assets, and liquidity issues meant many investment products were trading close to their Net Asset Values (NAV), or even below NAV. Bitcoin miners, under market pressure, were selling their Bitcoins at any cost, which undoubtedly intensified the downward trend. Considering all these signals, I judged that the crypto market in the first half of the year did not have much good risk-reward space, and the market might face greater volatility. It turned out that this judgment was correct.

On February 5, we indeed saw a market pullback. However, I think that drop was more like a short-term trading opportunity, suitable for "short-term holding" rather than "long-term buying." While the market did experience some rebounds afterwards, the overall spillover effects and volatility in the crypto market are still key concerns.

There have also been some positive signals in the recent market performances. For example, the fear sentiment in the market has eased, and volatility in the stock and bond markets is rising, indicating that investors are beginning to reassess market risks. In the crypto market, we also noticed signs of some sentiment being cleansed, such as the 30-day moving average of funding rates turning negative. Typically, this indicates that the market may be nearing a more stable bottom. Additionally, Strategy has recently made large-scale Bitcoin purchases again, which has injected some liquidity into the market.

Nevertheless, I remain cautious about the overall positioning in the market. The current market environment continues to face significant uncertainties, especially during January and February, when cash allocations were at historical lows. From the perspective of major stock indices and the broader stock market, the current market pricing still seems overly optimistic, indicating that the market may not have truly undergone a comprehensive liquidation.

Despite the current uncertainty in the market, I maintain an optimistic outlook on Bitcoin’s long-term prospects. I believe that a notable upward turning point may occur in the market before the end of the year, but before that, the crypto market may need to undergo a challenging adjustment period.

For investors, it is crucial to closely monitor the global macroeconomic environment, particularly the Federal Reserve's monetary policy, geopolitical risks, and potential pressures in the private credit market. These factors will not only affect traditional financial markets, but also profoundly impact the cryptocurrency market through spillover effects. Nevertheless, I still believe that the fundamentals of Bitcoin remain strong, and its value is expected to continue to grow in the long term.

Do these risks have to occur? Not necessarily, but I believe these risks still exist, especially considering the many potential uncertainties in the market. For instance, geopolitical risks remain a key issue to watch. At the same time, international oil prices are still high, nearing $100 per barrel, and the credit market is also beginning to show some signs of deterioration. While these issues do not fully stem from geopolitical risks, they indeed present challenges that the market cannot ignore.

Additionally, the Federal Reserve is set to hold a meeting tomorrow. From the current market expectations for rate cuts, this year's rate cuts are nearly "excluded" from the yield curve. While I think the Fed's policy adjustments could bring some positive influences to the market in the second half of this year, given the current internal divisions and policy uncertainties within the Fed, it is hard for me to foresee that they will take a markedly accommodative stance in the short term to support the market.

Strategy’s Continued Purchases, Bitcoin Fund Flows, and Market Risks

Zack Guzman: Earlier this year, you mentioned that the market might face severe volatility, and your predictions have proven correct as Bitcoin indeed swiftly dropped to around $60,000 and lingered at that low point for some time. Interestingly, you warned about this even before the outbreak of the Iran war. This leads me to wonder—should similar geopolitical events also be included in the assessment of market risks?

Moreover, we have inflow data from CoinShares showing that digital asset investment products have seen inflows for three consecutive weeks. You mentioned the large-scale purchases by Michael Saylor and Strategy. If the market were to head in another direction, perhaps Saylor's purchases wouldn't garner widespread attention as they do now. But when we combine these factors, we do find some worthy trends. Could this lead to a sort of "crowding out effect," suppressing the enthusiasm of other market participants?

Deep Tide TechFlow Note: Crowding Out Effect is a term used in economics and finance to describe a situation where the excessive concentration of funds or resources in one area leads to the squeezing out of resources in other areas or markets. In the crypto market, this concept is often used to describe large investors, such as "whales," driving up the prices through massive purchases of certain crypto assets (like Bitcoin), which may attract attention to the market and force other investors' funds and enthusiasm to withdraw or reduce investments in other assets.

Sean Farrell:

I’m not sure if I would call it a "crowding out effect," but I do think it is part of market risk. We have seen similar situations in the past: in a short time, the performance of crypto assets significantly outperformed the stock market, and this rally was usually led by large institutional investors or "whales" like Strategy.

The problem is that once these spot purchases stop, the overall market support may appear insufficient. If, in a week, demand for common stock from Strategy or other whales weakens, then after these massive purchases withdraw, the market may lack sufficient "supportive buying" to absorb it. This situation is likely to lead to further market volatility and increase investment risks in the short term.

Why the Crypto Market Remains a Playground for Traders

Zack Guzman: You mentioned earlier this year that many fund managers had little cash on hand. Do you believe that the current risk-reward situation suggests that the available buying funds in the market are limited, and that Bitcoin and other crypto assets might be the first to be affected if investors need to sell? I would like to know what concerns you the most right now?

Sean Farrell:

I agree with your perspective; I tend to view the market from a tactical perspective more than some of my colleagues. From our current judgment, I think the market is not far from the bottom, but still has a way to go to the top. My task is to help investors manage risk better and outperform Bitcoin during market cycles. Frankly, the current market is not in a clear trending direction, and we are still in a typical trader's market.

For investors looking to gain an edge in the market, it is very important to maintain a clear yet flexible tactical viewpoint in the short term. Reflecting on early February, there was a market decline, but now, the market has rebounded significantly: Bitcoin's price has risen about 20% to 25%, with even larger gains in altcoins.

From the current risk-reward perspective, I believe that appropriately increasing "dry powder" (reserving cash or ammunition) during the market’s upward movement may be a wiser choice.

Sean Farrell's Continued Optimism for Hyperliquid

Zack Guzman: Arthur Hayes had proposed a price target for HYPE of over $100. When we analyze the actual data driving HYPE's performance, we can see many interesting phenomena. For example, there are many users trading gold, silver, and oil contracts on the Hyperliquid platform. Combining these factors, are you optimistic about HYPE like Arthur Hayes? If possible, what is your target price for HYPE? Also, I know you’ve talked about DATs (Digital Asset Treasuries); what is your view on HYPE's future development?

Sean Farrell:

Last year, we set a target price for HYPE of about $100, which still has considerable upside compared to the current price (as of recording, HYPE was priced at $40.55).

From a fundamental perspective, Hyperliquid is one of the most attractive targets in our portfolio. This includes not only the Hyperliquid token HYPE but also the associated digital asset treasury company Hyperliquid Strategies, which is also performing excellently.

Recently, Hyperliquid launched their HIP-3 market, which is a permissionless market where anyone can create their own market. These markets primarily consist of tradeable assets, such as perpetual futures contracts tracking commodities and stocks.

I also shared a chart: in the first 15 days of March, the HIP-3 market’s trading volume reached $28 billion, largely due to recent cross-asset price fluctuations and global macroeconomic turmoil. We noticed that many investors were trading oil contracts over the weekend, and before that, precious metals were also a hot trading focus.

These trading activities not only increased Hyperliquid's revenue but also importantly came from external assets outside of the cryptocurrency ecosystem, which is why we observed a significant decrease in the correlation between HYPE and Bitcoin. Traditionally, the correlation among crypto assets is quite high, usually close to 1. However, since the beginning of this year (as of last week), the 90-day correlation between HYPE and Bitcoin is only about 0.4, and this low correlation makes HYPE an important supplement for constructing a crypto asset investment portfolio.

In the past few weeks, HYPE has seen considerable price appreciation; it may need some adjustments in the short term to digest this gain. However, in the long run, I remain very confident in the prospects of the Hyperliquid protocol.

Crypto Regulation, Clarity Act, and Market Structure

Zack Guzman: If we want to clear the current fear in the market, aside from the smooth passage of the Clarity Act, what other factors are you watching? In other words, what kind of final catalyst do you think is needed to make you, like Tom and other crypto bulls, believe again in the crypto market’s potential for resurgence?

Sean Farrell:

I want to first address the regulatory issues. At the beginning of the year, I was relatively optimistic about the prospects of the Clarity Act, believing it had the potential to pass. This optimism was mainly based on two reasons: First, this year is a midterm election year, and the Republican Party's position in Congress is not secure; second, organizations like Fairshake have just raised nearly $200 million in a "war chest" to support relevant legislative efforts, which made me think the risk-reward balance at that time leaned towards the Clarity Act's passage.

However, as time passes, the situation has become more complicated. From what I have gathered in the industry, banking lobbyists are strongly opposing this bill, and the prolonged controversy surrounding stablecoin yields has lasted much longer than expected; this “battle” is turning out to be more persistent than many had imagined. Additionally, Congress faces many other higher-priority issues, making the Clarity Act's prospects even more uncertain.

Nonetheless, I think the market is underestimating a fact: regardless, the SEC and CFTC will continue to advance related rulemaking. Therefore, I anticipate that some positive changes in the market structure will bring certain beneficial effects in the second half of this year; of course, I still hope the Clarity Act will ultimately pass, which would be an important milestone.

As for the conditions you mentioned for "re-aligning" or changing my views, I think that if there were a kind of broader market "capitulation," that would make me more confident in low-cost buying.

Another possible scenario is that the geopolitical risk premium begins to decline, market expectations regarding interest rates stabilize, and the credit market normalizes. Meanwhile, if the market can enter what I call a trending market, exhibiting a clearer direction, I would be more willing to take action.

Specifically, if market prices can break through key moving averages again, institutional capital starts to flow back, and CME’s open interest increases, along with an expanding basis, I will be more confident to increase my investment.

Pressure in Private Credit and Broader Market Risks

Zack Guzman: In your judgment of the market, how much is based on considerations of macroeconomic risks? If we view the current market risks from a broader perspective, especially regarding the pressures in the credit market. However, my professional experience tells me that the real risks leading to market downturns are often not those widely discussed. So, could this pressure in the credit market also pose additional pressure on the crypto market?

Sean Farrell:

I believe there will indeed be some impact; sometimes people may quickly forget some important things. For instance, recently everyone is focused on geopolitical events like the Iran war and their impact on commodity prices, which is certainly important. However, even before these events occurred, we had already seen many significant issues in the broader market, one of the main driving factors being the deterioration of the private credit market.

Recently, we've seen many private credit funds being forced into redemptions while also marking down the valuations of their held assets. Of course, I do not have a complete understanding of the overall credit quality of these private credit assets, as there can be significant differences among them, but when you repeatedly see negative news, you have to stay vigilant regarding this trend.

From the market's performance perspective, many alternative asset management companies’ stock prices have suffered severe hits. Simultaneously, we are also observing the gradual widening of credit spreads (an important indicator of corporate financing costs), which aligns with the decrease in prices of alternative asset management firms. Although the current absolute level of spreads is still low, what is more concerning is the speed at which the spreads are widening, and this speed is not optimistic. If we wait until credit spreads fully soar before acting, it will be too late.

This situation may indeed exert some impact on the market, but I do not believe it will evolve into systemic risk; some issues may relate to technology companies affected by AI. For example, many private credit targets are software companies, which might face issues of market share being diverted due to the rapid development of AI. Additionally, AI could lower these companies' terminal value, further impacting their valuations.

Thus, this is certainly something I am closely watching. I am still working on clarifying how it may manifest and the specific timing, but regardless, it is indeed a direction worth monitoring.

Why He Hasn't Changed His Bitcoin Target Price

Zack Guzman: Every time you come on the show, we discuss your long-term price predictions. For instance, I recall you set a target price of $115,000 for Bitcoin at the beginning of the year. When you review your predictions from January, do you feel the need to adjust them? In other words, as we approach the end of 2026, will you reevaluate these targets?

Sean Farrell:

It is now only mid-March, and I think it is unwise to adjust these long-term predictions at this time. I still believe we will benefit from some favorable factors we previously emphasized, which may manifest in the second half of this year, so I currently have no plans to adjust the year-end target price.

My focus remains on managing short-term market volatility and increasing investment when a more clear trend reversal appears in the market.

What Should Crypto Investors Watch for in the Federal Reserve Meeting?

Zack Guzman: As the Federal Reserve meeting is set to convene this Wednesday, what will you pay special attention to? When the Fed issues its statement, how will you interpret it? What do you think crypto investors should focus on?

I remember you mentioned in a recent report that the market seems to have begun pricing in some "dovish" expectations, believing that Fed Chair Powell may signal some easing at the meeting. But as you mentioned, this situation feels like a tug-of-war: on one hand, soft employment markets have raised many concerns, especially regarding jobs that could be replaced by AI; on the other hand, inflation risks seem to be rising again.

Sean Farrell:

I agree with your perspective. Most people expect Powell might take a relatively "neutral" stance at this meeting, as there is currently not enough reason for him to adopt an overly hawkish policy stance.

Investors should pay close attention to the Fed's dot plot and economic projections summary. These tools will reveal the Fed's latest expectations regarding future inflation, economic growth, and unemployment rates and may offer insights into their views on future rate cut paths.

If the dot plot shows that the Fed's expectations for rate cuts are pushed to 2027, it could have a negative impact on asset prices. This adjustment may shift the market’s attention to other risk factors and could further amplify the existing war risk premium in the market. Of course, the ultimate market reaction will depend on the specifics of what the Fed releases.