Another drop, is the drop just beginning? Will there be a big drop like the “312” and “519” drops this time?

Let's see if the conditions for a sharp drop are met:
Four extremely high risk factors:
1. Macro liquidity crisis

 

1. According to the macro-rule of the Fed's interest rate hike, due to the continuous interest rate hike, there is often a crash at the end of the interest rate hike due to a severe shortage of funds.

After all, BTC has only a 15-year history. The truly valuable transaction and price data came after 12 years, and the early reference value is not great. In the past 10 years, it was not until 15 years later that it really attracted the attention of mainstream market funds. Subsequently, BTC has become increasingly correlated with mainstream financial assets such as gold and US stocks, and has been increasingly influenced by US institutional funds, making it increasingly difficult for BTC to break out of its independent market. Therefore, when predicting the future trend of Bitcoin, the first thing to refer to is the impact of the Federal Reserve's monetary policy, such as interest rate hikes and rate cuts, on risky assets.

Judging from the Fed's historical interest rate cut and interest rate hike cycles, there is often a crash caused by a severe shortage of funds due to continuous interest rate hikes.

As shown in the figure, at the end of the two major interest rate hike cycles of the Federal Reserve
1) June 2007 to early 2008
2）2018.6-2018.12

(Federal interest rate history chart)

In these two periods: June 2007-early 2008
, S&P plunged 20%

 

 

2018.6-2018.12; S&P fell sharply again by 20%

 

 

Therefore, in the later stage of interest rate hikes, there is a risk of a severe shortage of market funds leading to a sell-off. Currently, the Federal Reserve has maintained a high interest rate of 5.25-5.5% for a year, which has the conditions to trigger a macro crisis.

In addition, at the macro level, as May inflation and PCE data have fallen beyond expectations, the market has gradually increased its bets on a rate cut in September. CME's interest rate monitoring tool shows that the market expects the probability of the Federal Reserve cutting interest rates at the September meeting to be 66.5%, a significant increase from 50.4% last month.

In addition, at the June interest rate meeting, the Fed's changes to the interest rate cut conditions also sent a positive signal to the outside world: weak employment will prompt the Fed to cut interest rates ahead of schedule, while strong employment will not necessarily cause the Fed to postpone rate cuts. The key factor in determining whether to postpone rate cuts is inflation data. In other words, if the unemployment rate continues to rise, the Fed will cut interest rates ahead of schedule, but if employment is strong and inflation pressure is low, the Fed may also cut interest rates ahead of schedule.

 

In this window of impending rate cuts, it is very likely that a round of clean-up of risky assets will be carried out first;

2. Cryptocurrency’s own liquidity crisis

Since June, the entire cryptocurrency market has fallen by 20%, but many tokens may have fallen by as much as 50%+; the main reason is that the continuous listing of new tokens and the massive unlocking of tokens in the previous bull market have continuously drained the market's liquidity; the continuous wash-out without a large-scale decline means that the previously locked-in chips are still reluctant to be sold. In this case, either the wash-out will continue for several months, or a liquidity crisis will directly break out, accelerating the sell-off.


2. Unfavorable data on BTC chain: Long-term profit starts to ship out in large quantities again
Bitfinex pointed out in its latest report that long-term Bitcoin holders are once again achieving profitability, and more profit-taking by long-term holders may cause significant short-term downward pressure on Bitcoin’s price. Bitfinex analysts said that long-term holders, who have paused profit-taking since early May, appear to have begun selling off their holdings again, and continued high profit realizations by long-term holders mean that Bitcoin’s near-term prospects are fragile. The last time long-term holders sold was above 70,000, this time it was above 60,000, which may trigger a new round of downward trend;

4. Contract open interest that breaks through historical highs becomes a risk

First, the exchange’s contract open interest is at a historical high, and there is no large-scale leverage reduction activity.

DEFI lending on the chain has reached a new high in the past year. Once the market plummets, it is easy to trigger large-scale liquidation in the market, causing the market to spiral downward.

In summary, the current market has the conditions for 312 and 519. It just depends on whether the market will continue to clean up and build a bottom or sell off in one go. Let's wait and see. But in any case, it is now in a high-risk stage, and it takes time to build a position. It has been more than a month since the correction began in early June. It is obvious that this wave is preparing for the start of a crazy bull market in the second half of the year. The deeper and wider this wave of adjustment is, the more conducive it will be to a substantial rise in the second half of the year.


Borrowing a mining cost chart of a mining machine to focus on the appropriate bottom-picking position: the first area is 48000-52000; the extreme area is 42000-45000;
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