Author: Asher Zhang
On August 5, Bitcoin plummeted, and many whales were liquidated, and the market was in mourning. Many people attributed the market crash to the expected US recession and the yen interest rate hike, but they seemed to ignore the huge internal selling pressure. In addition, the market overemphasized the impact of accidental factors on the development of Bitcoin market trends. From the perspective of least resistance, this accidental factor only increased the depth of the plunge. The author mainly focuses on the trend research of Bitcoin, and our previous articles are basically in line with the basic trend of Bitcoin. This article hopes to provide some Bitcoin trend analysis views without the influence of accidental factors from the perspective of trend for readers' reference.
After Bitcoin’s July comeback, $70,000 becomes a major obstacle
Between the big drop and the big rise, there are always various reasons that make users bullish or bearish, which also creates the core of the long-short game. So when we talk about the development of trends, we must be clear about the length of the cycle we are talking about. If we look at the bull market as a whole, it is still difficult to say that the cycle law of the bull market has been changed. In the future, this article will still focus on the bull market. From a macro perspective, although the recent employment data in the United States is lower than expected, more data is needed to confirm the recession of the US economy. It is too hasty to completely switch to short positions at this time. This article discusses more trend changes between weeks and months, which is also the characteristic of the author's previous trend research articles. Next, this article attempts to discuss the internal reasons for the decline in this market from the perspective of trends.
The author previously believed that the reason for the turnaround at the end of July was mainly due to two dimensions: 1. Analysis of the German government's sell-off and the Mt.Gox sell-off; 2. The impact of Trump's speech. Specifically, after the German government's sell-off ended, the market panic weakened, but when Mt.Gox paid out, the market underestimated the selling pressure of retail investors, and retail investors tended to chase highs and sell lows. With the stimulation of Trump's speech, the crypto market rebounded sharply. However, when the market failed to effectively break through $70,000, the market bulls had already lost their offensive power.
Why does the author think that after Trump’s speech, Bitcoin will be available in August? There are three other indicators worth paying attention to. The first is that after Bitcoin entered US$70,000, Wall Street institutions had insufficient momentum to increase their holdings, which can be confirmed by their past history of increasing their holdings. At present, the institution as a whole is still in a hoarding stage, and its willingness to raise prices wildly is not strong. In addition to this, Bitcoin miners started selling at $70,000. As early as June 13, CryptoQuant published an article on the As Bitcoin prices fluctuated between $69,000 and $71,000, miners stepped up selling. Data shows that on June 10, miners sold 1,200 Bitcoins through OTC transactions, setting the highest daily trading volume in two months. In addition, Bitcoin has seasonal characteristics in August, which is also a similar situation at the macro level.
The above three indicators have hinted at the weakness of the bulls to some extent. At this time, if there are negative macro factors, this decline will be difficult to curb. Other macro negative factors include the US employment data that is lower than expected, the Japanese yen interest rate hike, and the US government's release of about 28,000 bitcoins; on this basis, the Mt Gox settlement agreement allocated 33,960 bitcoins, and the Genesis creditors allocated $1.5 billion worth of bitcoins and Ethereum. These daily selling pressures are difficult to resolve in the short term, and coupled with the liquidation of whales, the market finally plummeted.
A very accurate Bitcoin bottom-picking indicator
The author believes that when Bitcoin reached around $70,000 at the end of July, it was indeed difficult to make a direct decision to short, but it was not difficult to make a certain hedge based on the above trend research in order to wait for more favorable factors to emerge. However, when Bitcoin plummeted, there was a very accurate bottom-picking indicator that was enough to support investors to actively enter the market. That indicator is the miner shutdown price, which is a very accurate indicator under many rounds of bull and bear tests.
According to poolin data, the current shutdown price of the mainstream Bitcoin mining machine Antminer S19XP is $54,507, and the Antminer T21 is $48,169. For Bitcoin, $48,000-54,000 actually forms a very important price support range, especially after Bitcoin fell below $63,000, investors should consider gradually building positions at this position, which is almost a gradual bottom-fishing range that can be confirmed without too much technical analysis and market analysis.
In addition to the intuitive data above, CryptoQuant CEO Ki Young Ju provided a statistical analysis of data worth referring to. On August 6, CryptoQuant CEO Ki Young Ju posted on X that the data showed that the cost basis of Bitcoin is as follows: ETF/custodial wallet: $65,000; Binance traders: $55,000; mining companies: $45,000, and in the past market downturns (May 2022, March 2020, November 2018), below this level confirmed the bear market; old whales: $22,000. As mentioned above, Bitcoin is still dominated by a bull market in terms of the general trend, and from the perspective of the shutdown price of mining machines, $45,000 is almost the limit of Bitcoin's decline.
How will Bitcoin develop in the future?
How will the price of Bitcoin develop in the future? Judging from the current dominant factors, the US macroeconomic situation is still a major influencing factor. So, how do market experts view the future development of the US and Bitcoin?
Goldman Sachs CEO Solomon expects the Federal Reserve to avoid an emergency rate cut because he believes the U.S. economy will not fall into recession. Solomon said: "I don't expect to see any progress before September. The economy will develop steadily and there may not be a recession. Based on the economic data we are seeing and the information sent by the Federal Reserve, I think there may be one or two rate cuts this fall."
Alex Krüger, a cryptocurrency analyst, wrote on X: "This round of market collapse is clearly driven by macro factors, not specific to the cryptocurrency industry." A financial crisis caused mainly by a large number of Japanese leveraged speculators is much better than a financial crisis caused by a recession in the United States. As for the US data, the focus is now on the job market, so pay special attention to the number of initial unemployment claims on Thursday (usually not a market-moving data), and the state employment data to be released on August 16 (State Employment data, which provides detailed state-level employment data and is rarely paid attention to by the market).
On August 6, 10x Research said in its latest report that many people attributed the Bitcoin sell-off to the unwinding of the yen carry trade, but the reality is much more complicated. Bitcoin has been vulnerable since mid-March, and has remained range-bound despite a 15% rise in the Nasdaq and a 10% depreciation of the yen during this period. Carry trades rely on continued high interest rates in the United States, which are unlikely to continue. The rules of the game have changed. In the past 24 hours, crypto market trading volume reached $244 billion, the highest level since March 6. Bitcoin experienced a large amount of intraday liquidations on the day after reaching an all-time high. As new asset price drivers emerge, financial markets are like puzzles that need to be reassembled periodically, and this is one of them. Unlike the sharp declines in April and June, which were eased by increased leverage, there may not be such a reversal this time.
On August 6, QCP Capital said in its latest analysis: As for the rumors of an emergency rate cut, QCP believes that this is unlikely because it will seriously damage the credibility of the Federal Reserve, exacerbate market panic, and make people believe that a recession is coming. In addition, yesterday's risk-averse trend washed away a considerable portion of leverage. With prices plummeting, perhaps now is the time to consider accumulating BTC and ETH spot. It is certainly too early to draw conclusions about whether the market has returned to normal. Although the VIX index has fallen from yesterday's peak of more than 65, it is still above 30.
On August 6, Coinbase researcher David Duong said that market conditions on Tuesday indicated that as buying activity on centralized exchanges increased, a short squeeze could occur, which could lead to a market rebound in the coming days. In addition, Genesis distributed Bitcoin and Ethereum in kind in its bankruptcy liquidation plan; the unwinding of the yen carry trade may also affect Mt.Gox creditors' current decision to receive Bitcoin. The recent decline in the market does not represent the beginning of a new long-term trend or market cycle.
Summarize
From the perspective of trends, Bitcoin is still under great pressure to attack, mainly due to the selling pressure from miners, the selling of the US government, and the compensation of Mt.Gox and Genesis, which makes Bitcoin under great pressure to attack, and it will take some time to digest. However, once Bitcoin enters the range of 48,000-54,000 US dollars, investors can actually gradually buy the bottom. According to the forecast of Goldman Sachs analysts, the Federal Reserve may cut interest rates one or two times this fall. This will actually provide positive momentum for Bitcoin. In addition, with the approaching US election, Trump's radical remarks will help repair market sentiment, thereby driving the rise of Bitcoin. However, the author is more optimistic about the market situation in the first half of next year. The core reason is that the market has digested the recent huge selling pressure, and the interest rate cut of the Federal Reserve will provide sufficient funds for the crypto market.
