Falling and falling, up and down, where are we now?
1. The current situation The current bottom can be judged based on the following three aspects:
Valuation bottom + sentiment bottom, valuation bottom/mining cost after halving. How high the mining cost is depends on the electricity bill, which fluctuates between 40,000 and 60,000 US dollars. The initial average cost of the original mother is estimated to be 52,000 US dollars. (Today, Boss Wu said it was 60,000). But it is currently far from the cost average and the bottom. In other words, there is still room for decline.
If verified by historical data, since reaching a high point at the end of 2021, the BTC price has reached a bottom of more than $16,000 at the end of 2022, basically around the lowest cost of mining 4. Therefore, this bottom is reliable.
2. Emotional bottom, is the current market sentiment still optimistic? The current cryptocurrency fear and greed index is above 60, which is biased towards greed. From the historical data, the market should be in fear when the bottom appears, and in extreme fear when it plummets. Therefore, the market sentiment does not support the current stage bottom.
3. Liquidity bottom, judgment on liquidity, including the Federal Reserve balance sheet, monetary policies of countries around the world, etc. Financial liquidity = available Federal Reserve balance sheet size - TGA account (changes in fiscal deposits) - reverse repurchase (cash on the Federal Reserve account of money market funds), indicating that it is currently in a stage of declining liquidity, but liquidity is better than in the fourth quarter of 2023.
Based on the above two dimensions, although the market has experienced a wave of significant decline, it is still in the shock adjustment stage of the bull market as a whole. In other words, there is still room for downward movement. Then we need to analyze the possibility of downward movement and the monetary liquidity factor, which is simply when the Federal Reserve will cut interest rates.
2. When will the interest rate be cut? Core viewpoint: Path of interest rate cut: There is still a possibility of interest rate cuts this year, but it requires tightening financial conditions as a prerequisite, so the Fed needs to maintain a tightening stance for a certain period of time. Currently, every new and important economic data release or speech by a Fed official will bring disturbances to the market, indicating that the market has not reached a consensus on liquidity expectations.
In order to avoid interference in this regard, we only need to pay attention to three indicators: economic growth rate (GDP), price level (CPI, PCE), employment situation (unemployment rate, etc.), and we need to wait patiently for the indicators to be clear, that is: the economic growth rate is indeed declining, or the price level is clearly declining, or the situation continues to deteriorate.
If two of these three indicators meet the requirements for a rate cut, the market will quickly reach a consensus on liquidity expectations, and a rate cut will not be far away. Geopolitical factors: This refers to the situation in the Middle East and the Russian-Ukrainian war. Their impact is indirect and obscure, and may affect the market from multiple perspectives. For example, changes in risk aversion affect commodities and thus affect price levels, etc.
This factor is difficult to analyze, and it is difficult to predict black swans. Second, the logic may change and the logical thinking needs to be adjusted at any time. At present, it can only be said that it is very unclear and a risk point.
Other factors, such as changes in national policies on cryptocurrencies, lead to changes in participants in cryptocurrencies, resulting in inflows or outflows, etc. For example, the launch of the US BTC ETF, the launch of the Hong Kong BTC and ETH ETFs, and the complete ban on cryptocurrencies in mainland China a few years ago. At present, the launch of the Hong Kong crypto ETF has limited impact on the market, just like digging a new reservoir, but it will not affect anything without water flowing in.
In summary, the short-term market is still unclear and there is still room for decline. The things to watch in the future are: US economic data (GDP, CPI, unemployment rate, changes in the situation in the Middle East and Russia and Ukraine. At present, we still need to wait patiently for the situation to become clearer.
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