From the perspective of a short-term holder

As an important driving force for the transition from bull to bear market, short-term holders’ trading behavior often becomes an important reference for market sentiment and trend changes during the bull market cycle.

Looking back at the last cycle, it is not difficult to find that two significant black swan events had a huge impact on BTC prices. In the 3.12 incident, STH-MVRV (short-term holders' market value to realized value ratio) fell to 0.59, which means that short-term holders lost an average of 41%. In the 5.19 incident, although the STH-MVRV fell slightly, reaching 0.67, short-term holders still lost an average of 33%, which shows the miserable market situation.

Entering this cycle, the market has also experienced several major events:

On March 10, 2023, Silicon Valley Bank collapsed, and the price of BTC fell from US$25,000 to US$20,000. During this period, STH-MVRV fell to a low of 1.02. On June 5, 2023, Binance was sued by the SEC, and the price of BTC fell from US$30,000 to US$25,000. During this period, STH-MVRV hit 0.95. On August 17, 2023, SpaceX sold US$373 million worth of BTC, resulting in long leverage liquidation. At this time, STH-MVRV fell to a low of 0.91.

Based on the STH-MVRV values ​​under these special events, we can correspond them to the current BTC price:

STH-MVRV 0.59 = $37,979STH-MVRV 0.67 = $43,129STH-MVRV 1.02 = $65,659STH-MVRV 0.95 = $61,153STH-MVRV 0.91 = $58,579

As the market gradually moves out of the bear market bottom, we can use the fluctuations of STH-MVRV to assess changes in market sentiment. The depth of STH-MVRV retracement often reflects the impact of events that cause BTC prices to fall.

For example, the COVID-19 pandemic in 2020 has had a huge impact on the global risk market, and the destructive power of the 3.12 incident is comparable to a magnitude 9 earthquake. However, in the current environment, we expect that the probability of a black swan event of similar magnitude (i.e., affecting human survival) will be extremely low. Therefore, we speculate that STH-MVRV is unlikely to fall to 0.59 again, that is, the BTC price is unlikely to fall to $37,979 (this situation can be ignored).

Although the 5.19 incident is also a black swan, its impact is far less than that of the COVID-19 pandemic. It is more of a panic event caused by the withdrawal of mining companies. Therefore, even if the US economic recession causes market shocks, its impact is expected to be comparable to the 5.19 incident. Based on this analysis, the retracement limit of BTC price in this bull market cycle is about $43,129.

The market's current expectations of the Fed's postponement of interest rate cuts and the possibility of only one rate cut this year are expected to have a similar impact on the crypto market as the Silicon Valley Bank crash and Binance FUD. Therefore, we believe that BTC prices are more likely to fluctuate in the range of $60,000-64,000 and $66,000-70,000.

In summary, we can draw the following conclusions:

Without a super black swan event, even if BTC is affected by other macro factors, the limit of its retracement will not be less than 43,000-44,000. The so-called super black swan event must have an impact that threatens human life (such as the Russian-Ukrainian nuclear war). Obviously, the US economic recession has not yet reached this level. The limit means "it is unlikely to be reached" rather than "it may be reached".

In addition, from a longer-term perspective, as time goes by, even if we enter the next bear market cycle, the lower limit of BTC's price will gradually rise. Therefore, BTC investors with a holding cost of less than $30,000 should cherish the current holding opportunity.

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