Compiled & Edited by: 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
Key Summary
Although many investors believe Bitcoin and other cryptocurrencies have bottomed out, market volatility and the ongoing uncertainty of the Iran war have led some analysts to remain cautious about this optimism.
Sean Farrell, a Fundstrat analyst who accurately predicted the market plunge in February of this year, shared his views on Bitcoin and crypto market risks in an interview with Coinage. He delved into Bitcoin's potential future trajectory, factors that could affect risk assets, and why his cautious stance on the crypto market remains. Additionally, he analyzed Hyperliquid's cross-asset growth potential, considering it one of the most noteworthy protocols in the crypto space today.
Highlights Summary
Market Timing and Positioning: A 'Tug-of-War' for Traders Now
- The market exhibited extreme positioning at the beginning of the year, with low volatility but unusually active trading in risk assets. Coupled with miners selling indiscriminately, I judged that the risk-reward ratio was not favorable for the first half of the year.
- The current market is not in a clear trending environment; it remains a typical trader's market. During market rallies, it is wiser to appropriately reserve cash (dry powder).
- The 30-day moving average of funding rates has turned negative, which usually indicates the market is approaching a more stable bottom. But I expect a difficult adjustment period is still needed before a turnaround towards the end of the year.
Institutional Game: The 'Auxiliary Buying' Vacuum Behind Saylor's Purchases
- Although large institutional purchases inject liquidity, the problem is that once these spot buys stop, the market may lack sufficient 'auxiliary buying' to take over, which increases short-term volatility risks.
- Many alternative asset management companies' stock prices have already been hit. If credit spreads begin to surge broadly, the impact on risk assets like the crypto market will be lagging but fatal.
Top Alpha Pick: Hyperliquid (HYPE)'s Paradigm Shift
- Hyperliquid is the most attractive asset in our portfolio. In the first 15 days of March, its HIP-3 market volume reached $28 billion, benefiting from user demand for 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 addition for constructing a crypto portfolio.
- We have set a target price for HYPE at around $100, representing significant upside potential compared to the current price (approx. $40).
Deep Water Macro Risks: Negative Correlation Between Private Credit and AI
- I am most concerned about stress in the private credit market. Many funds are forced to redeem and mark down valuations. Credit spreads are widening. If we wait until spreads surge broadly, it will be too late.
- Many private credit targets are software companies. The rapid development of AI may reduce the terminal value of such companies, thereby affecting their credit quality. This pressure will spill over into the crypto market.
Regulation and the Fed: Uncertain Catalysts
- Strong opposition from banking lobbyists and controversies over stablecoin yields have made the bill's passage prospects unclear. This battle is more protracted than imagined.
- Investors should focus on whether the Fed will delay rate cut expectations to 2027. If this happens, it will amplify the war risk premium currently in the market, negatively impacting asset prices.
- I am waiting for a 'capitulation washout.' If prices can break through key moving averages again and CME open interest increases, I would be more confident in increasing exposure.
Long-Term Vision: Target Price Unchanged
- Despite short-term caution, I have no plans to adjust the year-end target price of $115,000. Favorable factors may converge in the second half of this year.
Sean Farrell on "Predicting the Crypto Market Crash"
Zack Guzman: Welcome to a new episode of Coinage. It's great to have our guest back today—Sean Farrell, Head of Digital Asset Strategy at Fundstrat.
You were on our show at the beginning of the year and successfully predicted that market drop. Now Bitcoin seems to have experienced a rebound, but the market remains volatile. I noticed you recently released another report, particularly cautious about certain sectors in crypto. Could you share your thoughts on the current market volatility and how it affects the cryptocurrency market?
Sean Farrell:
I want to first revisit the situation at the beginning of the year when I was very cautious about the market. The market conditions at that time showed extreme positioning, low volatility but abnormally active trading in risk assets, while fund liquidity was unclear, with many investment products trading near or even below their net asset value (NAV). Bitcoin miners, under market pressure, were selling Bitcoin indiscriminately, which undoubtedly exacerbated the downward trend. Synthesizing these signals, I judged that the crypto market did not offer a good risk-reward space for the first half of the year, and the market might face greater volatility. This judgment proved correct.
On February 5th, we did see a market pullback. However, I believe that decline was more of a short-term trading opportunity, suitable for 'short-term holding' rather than 'long-term buying'. Although the market has rebounded somewhat since then, overall, the spillover effects and volatility of the crypto market remain issues that require close attention.
Recent market performance has also shown some positive signals. For example, market fear has eased somewhat, and volatility in stocks and bonds is rising, indicating investors are reassessing market risks. In the crypto market, we also noticed signs of sentiment being washed out, such as the 30-day moving average of funding rates turning negative. Typically, this phenomenon suggests the market may be approaching a more stable bottom. Additionally, [Micro]Strategy recently made large-scale Bitcoin purchases again, which also injected some capital liquidity into the market.
Nonetheless, my overall positioning in the market remains cautious. The current market environment still faces significant uncertainty, especially as cash allocations were at historically low levels during January and February. Looking at major stock indices and the broader equity market, current pricing still seems overly optimistic, suggesting the market may not have truly experienced a comprehensive washout.
Despite the current uncertainty, I remain optimistic about Bitcoin's long-term prospects. I believe the market could see a clear upward turn before the end of the year, but before that, the crypto market may still need to go through a relatively difficult adjustment period.
For investors, it is crucial to closely monitor the global macroeconomic environment, especially 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. That said, I still believe Bitcoin's fundamentals remain solid, and its value is poised to continue growing in the long run.
Will these risks definitely materialize? Not necessarily, but I believe these risks still exist, especially considering there are many potential uncertainty factors in the market. For instance, geopolitical risk remains a key issue worth watching. Meanwhile, international oil prices remain high, nearing $100 per barrel, and the credit market is also showing signs of deterioration. Although these problems don't entirely stem from geopolitical risks, they are indeed challenges the market cannot ignore.
Furthermore, the Fed is holding a meeting tomorrow. Judging from the current market expectations for rate cuts, cuts this year have almost been 'priced out' of the yield curve. Although I believe the Fed's policy adjustments could bring some positive effects to the market in the second half of the year, given the internal divisions within the Fed and policy uncertainty, I find it hard to foresee them adopting a clearly accommodative stance to support the market in the short term.
MicroStrategy's Continued Buying, Bitcoin Fund Flows, and Market Risks
Zack Guzman: At the beginning of the year, you mentioned the market might experience sharp volatility, and your prediction proved correct. Bitcoin did quickly fall to around $60,000 and hovered near that low for some time. More interestingly, you issued this warning before the Iran war conflict broke out. This makes me wonder, should similar geopolitical events also be incorporated into market risk assessments?
Additionally, we have fund flow data from CoinShares showing digital asset investment products have seen inflows for three consecutive weeks. You mentioned Michael Saylor and MicroStrategy's large-scale buying. If the market had gone the other way, perhaps Saylor's buying wouldn't have attracted so much attention. But when we combine these factors, some noteworthy trends do emerge. Could this potentially lead to some kind of 'Crowding Out Effect,' thereby suppressing the enthusiasm of other market participants?
TechFlow Note: Crowding Out Effect is a term in economics and finance, usually used to describe a situation where excessive concentration of certain funds or resources leads to resources in other areas or markets being squeezed out. In the crypto market, this concept is often used to describe how large investors like 'whales,' through massive purchases of a certain crypto asset (like Bitcoin), may drive up prices and attract market attention, thereby forcing other investors' funds and enthusiasm to withdraw or reduce investment in other assets.
Sean Farrell:
I'm not sure if it can be completely called a 'crowding out effect,' but I do think it is part of market risk. We have seen similar situations many times before: in a short period, crypto assets significantly outperform the stock market, and this rally is usually led by large institutional investors or 'whales' like MicroStrategy.
The problem is, once these spot buys stop, the overall support in the market may appear insufficient. If in a given week, market demand for MicroStrategy's or other whales' common stock weakens, then after these large-scale buy orders withdraw, the market may lack enough 'auxiliary buying' to take over. This situation could likely lead to further market volatility and increase short-term investment risk.
Why the Crypto Market is Still a Trader's Playground
Zack Guzman: At the beginning of the year, you mentioned that many fund managers had very little cash reserves. In your opinion, does the current market risk-reward imply that there is limited buying capital available in the market, and once investors need to sell, Bitcoin and other crypto assets might be the first to be affected? I'm wondering, what are you most worried about right now?
Sean Farrell:
I agree with your view. I am indeed more inclined than some of my colleagues to look at the market from a tactical perspective. Based on our current judgment, I think the market is not far from the bottom, but there is still some distance to the top. But my task is to help investors better manage risk and outperform Bitcoin through the market cycle. Frankly, the current market is not in a clear trending environment; we are still in a typical trader's market.
For investors who want to gain an edge in the market, forming a clear but flexible short-term tactical opinion is very important. Looking back to early February, the market dropped, but now it has rebounded quite a bit: Bitcoin is up about 20% to 25%, and altcoins have risen even more.
From the current risk-reward trade-off, I think it might be wiser to appropriately increase 'dry powder' (reserved cash or ammunition) during market rallies.
Sean Farrell's Continued Bullishness on Hyperliquid
Zack Guzman: Arthur Hayes once proposed a price target for HYPE, exceeding $100. When we analyze the actual data driving HYPE's performance, we see many interesting phenomena. For example, a large number of users on the Hyperliquid platform are trading gold, silver, and oil contracts. Combining these factors, are you as bullish on HYPE as Arthur Hayes? If possible, what is your target price for HYPE? Also, I know you've talked about DATs (Digital Asset Treasuries); how do you see HYPE's future development?
Sean Farrell:
Last year we set a target price for HYPE at around $100 per token. Compared to the current price, HYPE still has considerable upside potential (HYPE price was $40.55 at the time of recording).
From a fundamental perspective, Hyperliquid is one of the most attractive assets in our portfolio. This includes not only the Hyperliquid token HYPE but also the related digital asset treasury company Hyperliquid Strategies, whose performance has also been very strong.
Recently, Hyperliquid launched their HIP-3 market, a permissionless market where anyone can create their own market. These markets primarily consist of tradable assets, such as perpetual futures contracts tracking commodities and stocks.
I also shared a chart: in the first 15 days of March, the trading volume of the HIP-3 market reached $28 billion, largely thanks to recent cross-asset price volatility and global macroeconomic turmoil. We noticed many investors traded oil contracts over the weekend, and before that, precious metals were a hot trading topic.
These trading activities not only increase revenue for Hyperliquid but, more importantly, this revenue comes from external assets outside the cryptocurrency ecosystem, which is why we have observed a significant decrease in the correlation between HYPE and Bitcoin. Traditionally, correlations between crypto assets are very high, often close to 1. However, this year (as of last week), the 90-day correlation between HYPE and Bitcoin is only about 0.4. This low correlation makes HYPE an important addition for constructing a crypto asset portfolio.
HYPE's price has also risen considerably in the past few weeks and might need some consolidation in the short term to digest the gains. But 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, besides the smooth passage of the Clarity Act, what other factors are you watching? Or, what kind of final catalyst do you think is needed for you to believe, like Tom and other crypto bulls, that the crypto market can return to its glory?
Sean Farrell:
I want to first talk about regulation. At the beginning of the year, I was relatively optimistic about the prospects of the Clarity Act, believing it could eventually pass. This optimism was based on two reasons: first, this is a midterm election year, and the Republican position in Congress is not solid; second, organizations like Fairshake had just raised nearly $200 million in a 'war chest' to support related legislation, so I thought the risk-reward at the time favored the Clarity Act passing.
However, as time passed, the situation became more complicated. Based on information I've learned within the industry, banking lobbyists are strongly opposing this bill, and the controversy surrounding stablecoin yields has lasted much longer than expected; this 'battle' is more protracted than many imagined. Meanwhile, Congress faces many other higher-priority issues, making the prospects of the Clarity Act even more uncertain.
That said, I think the market underestimates one fact: Regardless, the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) will still advance related rulemaking. Therefore, I expect some positive changes in market structure to bring a certain bullish effect in the second half of the year. Of course, I still hope the Clarity Act will eventually pass, which would be an important milestone.
As for the conditions for 'changing sides' or altering my view, I think if the broader risk market experiences some kind of 'capitulation washout,' it would make me more confident in buying at low prices.
Another possible scenario is that geopolitical risk premiums start to decline, market expectations for interest rates stabilize, and the credit market normalizes. At the same time, if the market can enter what I call a trending environment, showing a clearer direction, I would be more willing to take action.
Specifically, if market prices can break through key moving averages again, institutional funds start flowing back, CME open interest increases, and the basis widens, I would be more confident in increasing investment.
Private Credit Stress and Broader Market Risks
Zack Guzman: How much of your market judgment is based on macroeconomic risk considerations? If we look at the current market risks from a more macro perspective, especially the pressure in the credit market. However, my professional experience tells me that what often causes market downturns are not the widely discussed risks. So, could this pressure in the credit market also create additional pressure on the crypto market?
Sean Farrell:
I think there will indeed be some impact. Sometimes people might quickly forget important things. For example, recently everyone has been focusing on geopolitical events, like the Iran war and its impact on commodity prices, which is certainly important. But actually, even before these events, we had already seen many issues in the broader market that cannot be ignored, and one of the main drivers is the deterioration of the private credit market.
Recently, we have seen many private credit funds forced to make redemptions while also marking down the valuations of their holdings. Of course, I don't fully understand the overall credit quality of these private credit assets, as they can vary greatly, but when you repeatedly see these negative news, you have to be alert to this trend.
From a market performance perspective, the stock prices of many alternative asset management companies have already been severely hit. At the same time, we have observed credit spreads (an important indicator of corporate financing costs) gradually widening, and this is consistent with the downward trend in the stock prices of alternative asset management companies. Although the absolute level of spreads is still low, what is more concerning is the speed at which they are widening, and this speed is not optimistic. If we wait until credit spreads surge broadly before taking action, it will be too late.
This situation may indeed have an impact on the market, but I don't think it will evolve into a systemic risk. Part of the problem might be related to tech companies affected by AI. For example, many private credit investments target software companies, and these companies may face market share diversion due to the rapid development of AI. Additionally, AI could also reduce the terminal value of such companies, further affecting their valuations.
So, this is indeed an issue I am closely watching. I am still trying to figure out how it might erupt and the specific timing, but it is certainly a direction worth paying attention to.
Why He Hasn't Changed His Bitcoin Target Price
Zack Guzman: Every time you come on the show, we talk about your long-term price predictions. For example, I remember your Bitcoin target price at the beginning of the year was $115,000. When you review these predictions you made in January, do you feel the need to adjust them? Or, as we get closer to the end of 2026, will you reassess these targets?
Sean Farrell:
It's only mid-March. I think it's unwise to adjust these long-term predictions now. I still believe we will benefit from some of the favorable factors we emphasized earlier, and these factors may materialize in the second half of the year. Therefore, I currently have no plans to adjust the year-end target price.
Currently, my focus is still on managing short-term market volatility and increasing investment when the market shows a clearer trend shift.
Fed Meeting: What Should Investors Watch?
Zack Guzman: What will you be watching specifically at the Fed meeting this Wednesday? How will you interpret the Fed's statement? What do you think crypto investors should focus on?
I remember you mentioned in a recent report that the market seems to be pricing in some 'dovish' expectations in advance, thinking Fed Chair Powell might release some accommodative signals at the meeting. But as you mentioned, this is like a tug-of-war: on one hand, weakness in the job market has raised many concerns, especially related to potential job displacement by AI; on the other hand, inflation risks seem to be resurging.
Sean Farrell:
I agree with your view. Most people expect that Powell might adopt a relatively 'neutral' stance at this meeting because he currently doesn't have enough reason to be overly hawkish in his policy.
Investors should focus on the Fed's dot plot and Summary of Economic Projections. These tools will reveal the Fed's latest forecasts for future inflation, economic growth, and unemployment and may also hint at their views on the future path of rate cuts.
If the dot plot shows the Fed delaying rate cut expectations to 2027, it could negatively impact asset prices. Such an adjustment might shift market attention to other risk factors and could even further amplify the war risk premium currently present in the market. Of course, the final market reaction will depend on the specific content released by the Fed.
