The author wrote an article on August 24, "It is difficult for U.S. interest rate cuts to directly boost Bitcoin, and the encryption market still needs to be driven by technology." At that time, the US Dow Jones Index rose for the fifth consecutive day, and the crypto market was also flooded with optimistic expectations of interest rate cuts. However, according to observations, there is a tendency between Bitcoin and the overall economy to follow the decline but not the rise. Moreover, there is a lack of internal innovation and severe selling pressure. Therefore, the author warned of the risk of weakness at that time. Along with the correction in U.S. stocks, Bitcoin has been falling recently, and the market seems to have gone to another extreme.
Market sentiment is obviously pessimistic. Is the bull market over?
As U.S. stocks weaken, Bitcoin continues to follow the decline but not the rise, which makes the market more pessimistic and even believes that the bull market is over.
Zeneca, founder of ZenAcademy and The 333 Club, posted on the X platform that the bull market may be over. I don't think so, but it could be. You should have a plan just in case. Like, if Bitcoin spent most of the next year down and hit $18,000, Ethereum hit $900, and $SOL hit $28... would you be ready?
Adam, a researcher at Greeks.live, posted on the , the Put Call Ratio is 0.63, the biggest pain point is US$2,500, and the nominal value is US$290 million. Cryptocurrency has been falling all the way this week. The weakness of the entire market can be clearly seen from the option data. The recent decline in the biggest pain point has not been able to keep up with the price drop. The main term IV has increased. As the US election approaches, the IV bump on October 8 is gradually being smoothed out. Last week, the transaction data of previous years were generally slightly flat, but. The market seems a bit too pessimistic, and we prefer to believe that there will be a bull market at the end of the year.
So, is the bull market really over? The author believes that the bull market in the crypto market is not over. Although the crypto market in September and October is expected to remain relatively weak, this is a good opportunity.
Bitcoin is linked to the overall economic market, and falling may be a good time to add positions
Historically, September has been a weak month for the U.S. stock market. Due to the impact of the overall economy, even if the Federal Reserve cuts interest rates as scheduled, Bitcoin is expected to remain weak.
Tom Lee, managing partner and head of research at Fundstrat Global Advisors, said a 7% to 10% correction in U.S. stocks is expected over the next two months, which would provide investors with a "buy-on-the-dip" opportunity. There are more worries about economic growth at the moment, so the jobs report and jobless claims data seem to trigger a bigger market reaction. I think this will be true in September as well.
"The next eight weeks should present an excellent opportunity to adjust your portfolio to be more diversified and allow market activity to really work in your favor," said Chris Hyzy, head of investments at Bank of America Private Bank.
Ulrich Urbahn, head of multi-asset strategy and research at Berenberg, said: "The risk of a stock market setback is likely to increase again. Given that positioning and valuations are rising again, we expect more volatility in the next two months."
Atlanta Fed President Raphael Bostic wrote an article on Wednesday that the Fed's dual missions of price stability and full employment are in balance for the first time since 2021, but it is not yet fully ready to declare victory over inflation.
On the whole, if the U.S. stock market will see a correction of 7% to 10% in the next two months, Bitcoin’s correction will not be lower than this range, and Bitcoin does not rule out a further fall to between $50,000-53,000. But just like U.S. stocks, whenever Bitcoin falls, it can also be seen as an excellent buying opportunity. Investors should take the opportunity to adjust their investment portfolios and make their assets more diversified, because the Bitcoin bull market will not end easily during the Fed's interest rate cut cycle.
Let’s talk about the reasons for Bitcoin’s decline and the driving force for its rise
Due to the high correlation between Bitcoin and U.S. stocks, the above article mainly talks about the factors that Bitcoin still has to rise from the overall economic perspective. So what are the intrinsic driving forces driving Bitcoin’s rise?
The selling pressure on Bitcoin is expected to be gradually digested in the next two months. In the article on August 24, "It is difficult for U.S. interest rate cuts to directly boost Bitcoin, and the encryption market still needs to be driven by technology." The author believes that one of the main reasons why Bitcoin will be weak is: after Bitcoin hits $70,000, The selling pressure of miners increased significantly, and at the same time, the intention of institutions to increase their holdings of Bitcoin ETFs also dropped significantly; in addition, the German government continued to sell Bitcoins at around 60,000 Bitcoins, and subsequently, the U.S. government, Mt. Gox , Genesis and others also sold their Bitcoins, which generated huge selling pressure. Under the huge selling pressure, the author does not believe that interest rate cuts can directly boost Bitcoin. However, if Bitcoin continues to be weak in September and October, this will give Bitcoin enough time to absorb the selling pressure, and institutions can easily take over Bitcoin at low levels, thereby accumulating strength for future gains.
In addition, the author believes that another reason why it is difficult for Bitcoin to rise directly is the lack of innovation. This can be intuitively felt from the on-chain data of Bitcoin and Ethereum.
Image source: Glassnode
In the first half of next year, innovation in the crypto market may begin to show results. Judging from the current development of Bitcoin and Ethereum, Ethereum is more like an innovative experimental field for Bitcoin. The inscriptions and runes of Bitcoin’s current bull market are similar to memes, and Bitcoin’s second-layer concepts and technologies also benefit from the development of Ethereum’s second-layer technology. However, due to the slowdown in innovation in Ethereum, the development of Bitcoin has essentially stalled. So, where will the innovations in the crypto market be reflected in the first half of next year?
One of the main reasons why Ethereum is weak in this bull market is the Layer 2 strategy, which takes away Ethereum's value capture capabilities. However, there are too many Layer 2s, which directly leads to liquidity fragmentation, making the Ethereum ecosystem fight on its own. However, with the breakthrough of cross-Layer2 interoperability, this situation is expected to be broken, and applications based on Layer2 interoperability will also break out of the circle.
In addition, the Ethereum Pectra upgrade is expected to be launched in the first quarter of 2025, which will also be the most anticipated event in the entire encryption market. Pectra merges Bragg (execution layer) and Electra (consensus layer) updates. This will also be something worth looking forward to in Ethereum.
One of the biggest changes to Pectra is the way it handles accounts. Among the upgrade proposals, EIP-3074 allows traditional wallets (externally owned accounts, or EOAs) to interact with smart contracts, such as batch transactions. EIP-7702 goes a step further and allows EOA to temporarily act as a smart contract wallet during transactions. Temporary means that your EOA wallet only becomes a smart contract wallet during transactions.
It works by adding smart contract code to the EOA address. This innovation of "EOA temporarily becoming a smart contract wallet" may be a big move that Ethereum is brewing. In addition to innovations at the account abstraction level, this upgrade also has multiple EIPs that have a huge impact on the entire ecosystem.
Next year's crypto bull market is worth looking forward to
From the perspective of the overall economy, the U.S. stock market is expected to rebound from the end of October. Considering the linkage between Bitcoin and the U.S. stock market, Bitcoin is expected to have a wave of prices at the end of the year (starting in November). This is mainly due to the linkage of the overall economy. However, by the first half of next year, Bitcoin is expected to start a new round of rising cycles driven by innovation in the crypto market and sufficient financial liquidity in the overall economy.
[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.
This article is reprinted with permission from: "Foresight News"
Original author: Asher Zhang
