As Bitcoin fell below 57,000, I compared the characteristics of the end of the last two bull markets in my mind:

2017 was the ICO bull market, which was jointly driven by the craziness of ICO + the continuous spread of encryption technology. The final end was also because the ICO model was unsustainable without incremental funds and users.

2021 is the DeFi bull market, which was jointly driven by the innovation and breakthrough of the DeFi model + the approval of Grayscale ETF + the liquidity brought by the Fed's unlimited QE. The final end was also caused by the interest rate hike.

In other words, no matter which round of bull market, the general background must be sufficient external capital inflows, and there are huge application innovations to undertake.

The main driving force of this round of bull market is the expectation of Bitcoin spot ETF and the external capital inflow brought about by this background. This part of the funds has an obvious arbitrage tendency, so you can see that the incremental funds brought by the full promotion of ETFs later only maintained a high level of sideways trading for a period of time. They may just be here to take over for arbitrage funds.

In the case of good fundamentals, leverage and credit expansion on the market are particularly obvious. AI, MEME, RWA, Bitcoin ecology and other tracks have all seen wealth creation effects and started rotation. The application level presents a situation of flourishing, and they are no longer castles in the air.

Therefore, the deep correction at this stage is basically caused by the continuous slowdown and even outflow of incremental funds of Bitcoin ETF. On this basis, arbitrage funds have phased out of the market. We have reason to believe that large-scale arbitrage funds have been deployed in the entire Bitcoin spot ETF event.

So is the bull market over?

I don’t think so. As I said in my previous tweet, there is no sign of outflow of the total amount of stablecoins on the market, and the Federal Reserve has no tendency to increase interest rate hikes and shrink its balance sheet.

Therefore, this stage is formed by the current window period of insufficient incremental funds for ETFs + postponement of the 2024 interest rate cut. At the same time, the large-scale new assets that have greatly drained the liquidity of the market are also an important factor.

Therefore, at present, we can only trade time for space, or there will be major events to restore confidence, such as the approval of Ethereum ETF, or representative companies have begun to announce the allocation of Bitcoin.