In the early hours of last night, the global cryptocurrency market experienced a dramatic price fluctuation. From the evening of April 12 to the early hours of April 13, the market value of major digital currencies such as Bitcoin, Ethereum Filecoin and a variety of other small tokens generally fell. This sudden market turmoil has attracted widespread attention from market participants. Analysts are trying to interpret the reasons behind this phenomenon, including possible external economic factors, policy changes, or a sharp shift in market sentiment.
Market Summary
From a macro perspective, the total market value of cryptocurrencies fell to $2537.9 billion, a 24-hour drop of 7.3%. As of the time of writing, Bitcoin fell to $65,000, a 24-hour drop of 4.91%; Ethereum fell to $3,100, with a maximum 24-hour drop of 9.34%; FIL fell to $5.55 and then rebounded, with a 24-hour drop of 18.7%. Other altcoins have all fallen by more than 10%. Ban qun; Free Wei; wuq6267
Bitcoin price action in the early hours of April 13. Source: Coinmarketcap
According to Coinglass data, the total liquidation volume in 24 hours was US$878 million, of which long liquidation reached US$784 million.
The reason behind
As far as the market is concerned, many people are already worried whether this is a precursor to the interruption of the bull market. At present, there are several different views on this plunge in the market:
First, the Fed announced last night that it would reduce interest rates to one instead of three times, and the expected discount on the interest rate cut was too large, which led to the sharp drop.
The second is that the positive impact of Bitcoin halving is negative, and the current plunge is due to the correction before Bitcoin halving. Several key reasons why the market may experience a correction and plunge before Bitcoin halving include:
First, since the block reward for Bitcoin mining will be halved, miners will receive fewer Bitcoins for the same mining work. This reduction in potential income may force them to pay for higher operating costs in the next quarter and sell Bitcoin at its current relative high, increasing supply pressure on the market and thus pulling down prices.
Secondly, the market's high expectations and speculation about the halving event may push up prices before the event, and once these expectations are not met, prices may reverse sharply. In addition, if the market buys in too much too early before the event, any small trigger close to the event may lead to large-scale profit-taking, resulting in a sharp drop in prices.
Finally, based on historical patterns and psychological expectations, investors often use historical patterns to guide current market actions. Given that past halving events have sometimes led to significant price increases, market expectations are high. However, if these expectations begin to appear overly optimistic, investors may begin to sell their holdings before the halving to take advantage of the current high prices, which could cause the market to fall.
Therefore, while the halving itself is a positive sign for Bitcoin, the uncertainty and speculation leading up to the halving could lead to significant market volatility and price corrections.
From a macro perspective, the Fed's balance sheet continues to shrink, reducing the supply of dollars in the market. The reduction in dollar liquidity, especially in the global financial system, usually leads to a fall in the prices of risky assets, including stocks and cryptocurrencies. Since the cryptocurrency market is very sensitive to changes in liquidity, capital outflows may lead to a sharp drop in prices. In addition, when the market expects that the dollar will become more scarce, investors may turn to more stable or traditional assets and reduce their investment in cryptocurrencies.
According to Arthur Hayes,
The Bitcoin block reward is expected to halve on April 20. This is often seen as a bullish catalyst for the crypto market. I agree that this will push prices higher in the medium term; however, price action directly before and after the halving can be negative. The narrative that the halving is positive for cryptocurrency prices is already entrenched. When the majority of market participants reach a consensus on a certain outcome, the opposite usually happens. This is why I believe that Bitcoin and crypto prices in general will see a drop around the halving.
Considering that the halving occurs during a period when USD liquidity is typically tight, this will add fuel to the crypto asset sell-off. The timing of the halving further aggravates my decision to pause trading until May. … Therefore, I choose to sell.
Bitcoin price trend before and after halving, source: Grayscale
good news
It is expected that Hong Kong will approve the Bitcoin ETF as early as next week. Hong Kong announced the issuance of a Bitcoin spot ETF, which means that Bitcoin can be legally purchased through Hong Kong stock accounts. Giants such as Meituan and Tencent can hold Bitcoin through this ETF, which will attract a large amount of capital inflow. In the future, the Hong Kong stock market may be dominated by Bitcoin ETF, Ethereum ETF, Tencent and Meituan, and stocks with low trading volume may be marginalized.
Despite the current uncertainty in the market, many investors and analysts remain optimistic about the long-term prospects of cryptocurrencies. They believe that this price adjustment may provide a good opportunity for long-term investors to enter the market. Every adjustment in the market is a test of investor sentiment and market trends, and it is also a period of layout for potential future growth.
