The crypto market application bull is still brewing.
Written by: Asher Zhang
The crypto market is now very bullish, but what kind of bull market is it in? From different perspectives, I think that the emotional bull market has already begun, the technical bull market in technical analysis has not yet broken through, the macro-financial bull market has quietly arrived, and the application bull market will take time. Below, I will talk about it in detail.
Crypto market sentiment bull market has begun
In September, Bitcoin continued to rebound from a low of around $52,528.6, reaching a high of $66,500, an increase of 26.5%. The author believes that the rise during this period was mainly driven by bullish sentiment.
The bullish sentiment in the crypto market mainly comes from the Fed’s interest rate cut. In early September or earlier, the market no longer doubted the Fed’s interest rate cut, and the main discussion was the extent of the rate cut. So when Bitcoin fell to a low level, the market showed a determined bottom-fishing fund, which mainly bet on the Fed’s interest rate cut, thus effectively pushing Bitcoin to $60,000.
On September 18, the U.S. Federal Reserve announced that it would lower the target range of the federal funds rate by 50 basis points to a level between 4.75% and 5.00%. This is the first rate cut by the Federal Reserve since March 2020, and it also marks a shift from a monetary policy tightening cycle to an easing cycle. Stimulated by the news of the Fed's 50 basis point rate cut, Bitcoin continued its second wave of surge, pushing it directly from $60,000 to more than $65,000. From a correlation point of view, the strong correlation between U.S. stocks and Bitcoin can effectively verify the author's speculation. According to IntoTheBlock data, last week BTC's correlation with the U.S. stock market reached its highest level in two years, a level that was only surpassed in the second quarter of 2022.
The author believes that there should be another wave of this bullish sentiment, mainly because China has recently seen a sharp interest rate cut and stimulus plan. The Political Bureau of the CPC Central Committee held a meeting on September 26, emphasizing that efforts should be made to boost the capital market, vigorously guide medium- and long-term funds into the market, and clear the blockages of social security, insurance, and wealth management funds entering the market. It is necessary to support the merger and reorganization of listed companies, steadily advance the reform of public funds, and study and introduce policy measures to protect small and medium-sized investors. On September 27, the People's Bank of China decided to reduce the deposit reserve ratio of financial institutions by 0.5 percentage points from September 27, providing about 1 trillion yuan of long-term liquidity to the financial market. After this reduction, the weighted average deposit reserve ratio of financial institutions is about 6.6%. The interest rate cut by the People's Bank of China this time is the largest interest rate cut in the past four years. Overall, China's monetary policy has also undergone major adjustments at the same time, and China's water release effect is expected to continue to drive Bitcoin to continue to strengthen.
The technical bull in market analysis has not yet broken through
As mentioned above, the author believes that the current driving force of the crypto market is still mainly macro-positive news, which has enabled the crypto market to be the first to get out of the emotional bull market. However, from the perspective of technical analysis, the technical bull market has not yet broken through and has entered a huge pressure zone (US$65,000-US$70,000).
I have previously published many articles discussing the huge pressure on Bitcoin at $65,000-$70,000, which is essentially the position that Bitcoin has failed to successfully stand in many favorable market environments. For example, Trump’s positive remarks at the Bitcoin Conference in August raised market sentiment, but it quickly fell back. Next, let’s review this from some historical data.
Judging from historical data, when Bitcoin miners were between $69,000 and $71,000, mining pools shifted, OTC trading volume surged, and large listed mining companies reduced their holdings significantly. Data shows that on June 10, miners sold 1,200 Bitcoins through OTC transactions, setting the highest daily trading volume in two months, when Bitcoin was near $70,000. Another indicator is that ETF funds show obvious signs of reduction when they are near $70,000.
On September 27, well-known trader Eugene Ng Ah Sio posted on social media that he reduced some positions and sold some assets, trying his best to stick to the plan despite the huge FOMO everywhere. He once posted on the X platform on September 25 to express his views on the bull market, saying: I will not blindly desire more profits as the price rises. For me, the $65,000 to $68,000 area is a reasonable profit-taking area for early Bitcoin buyers. Many wait-and-see funds will make their last entry at $65,000, which may also mean that this is the last upward momentum. I don’t think the $70,000 cap will be broken before the US election, so I won’t choose to add positions here. If it hits $68,000, I would rather choose to liquidate the decline to the $60,000 area and re-enter the market.
From a rational perspective, I agree with Eugene's point of view. Overall, Bitcoin will face heavy selling pressure in the range of $68,000 to $70,000, and a sharp correction is more likely. However, considering the recent monetary policy of the People's Bank of China, I am more optimistic. It is even possible that Bitcoin will directly break through $70,000 under some sudden good news. For example, in the last round, Tesla accepted Bitcoin payments, which directly pulled Bitcoin up. Overall, I think that we should guard against deep corrections and not be too aggressive, but we should not get off the bus easily.
The crypto market is quietly bullish
From a technical analysis perspective, it may not be too much to be cautious, but if you look at it from a financial perspective, investors should be more confident. From a certain perspective, if Bitcoin falls sharply, it will be an excellent opportunity to buy at the bottom.
U.S. investors have strong purchasing power and have become the main buyer. Julio Moreno, head of research at CryptoQuant, posted on the X platform that increased demand in the U.S. market has caused Bitcoin to rise to $65,000 today, and the Bitcoin premium on the Coinbase platform has reached its highest level in two weeks.
Activity on the Ethereum chain has increased significantly, DeFi transactions have increased significantly, and the market has shown a rare enthusiasm since the Cancun upgrade. Over the past week or so, there has been a surge in activity on the Ethereum chain, causing transaction fees to soar. Between September 16 and 26, average gas fees were 498% higher than the previous 30-day average, with Ethereum’s median transaction cost rising to $1.69 from $0.09 at the beginning of the month. In addition, the Ethereum decentralized exchange (DEX) transaction volume increased by 9% month-on-month, and the total Ethereum transfer volume increased by 17% month-on-month, further pushing up transaction fees. With the increase in activity on the Ethereum chain, the trend of Ethereum has begun to be slightly stronger than that of Bitcoin, and the performance of altcoins has also strengthened.
Institutions or whales are beginning to be optimistic about the long-term price trend of Bitcoin. The latest data on block trades released by Deribit officials show that on September 28, the platform's largest BTC block option transaction was a user earning $1.479 million to buy a $90,000 call option for Bitcoin at the end of the year and sell a $62,000 put option at the end of the year, totaling 488 BTC. Officials explained that the operation was long-term bullish, believing that the BTC price would rise sharply at the end of the year, and that a price above $60,000 at the time of delivery would be profitable.
The amount of stablecoins minted has increased significantly, and some institutions are clearly optimistic. Markus Thielen, founder of 10X Research, said that the amount of stablecoins minted increased sharply after the Fed's July meeting, when the Fed announced at the meeting that interest rates would remain unchanged, but hinted that policies might be relaxed in September. In the following weeks, the amount of stablecoins minted was close to $10 billion, injecting liquidity into the cryptocurrency market and significantly exceeding the spot ETF flow. In addition, the latest report released by 10X Research shows that Bitcoin's strong rise since the Fed's interest rate cut in mid-September and China's stimulus plan has enabled it to break out of the downward trend. As Bitcoin breaks through $65,000, it will quickly rise to $70,000 and then set a new record high in the short term.
Overall, an important sign of obvious capital inflows into the crypto market is the sharp increase in stablecoins; in addition, Ethereum's on-chain activity and the inflow of funds into Bitcoin ETFs are also very obvious signs. In addition, the activities of some whales and institutions also once again show that this rise is expected to be more lasting, and a real bull market is about to begin.
Crypto market application bull is still brewing
At the application level, although the crypto market has not yet seen any truly groundbreaking applications, the results presented at a series of recent conferences have once again demonstrated to the world the powerful technical strength and business prospects of Web3.
Recently, the Onchain Summer event data released by Base showed that the hackathon attracted more than 7,500 builders to actively participate. They jointly submitted more than 1,250 innovative projects, and finally 82 projects stood out after fierce competition.
From September 20 to September 21, Beijing time, Breakpoint, the largest and most influential event in the Solana ecosystem, was held in Singapore. At the Breakpoint event, Solana and its ecosystem projects demonstrated a series of achievements, which attracted much attention from the market. For example, asset management giant Franklin Templeton will launch a native mutual fund on the Solana chain, and Hivemapper announced that it has begun selling map data to three of the top ten map service providers in the world. Solana ecosystem projects also showcased their latest technological advances and achievements.
In the Bitcoin ecosystem, Fractal Bitcoin was launched on September 9, 2024, which introduced a hybrid mining model and developed very rapidly. In terms of Ethereum and its ecosystem, Ethereum has preliminarily determined that a major upgrade of Ethereum Pectra will be carried out in February 2025, and the tokens of the leading re-staking project EigenLayer will be launched soon.
Overall, the crypto market is still lackluster in terms of application innovation. Although the current situation of the crypto market has changed substantially from the perspective of sentiment and capital inflow, it is difficult for this bull market to start immediately from the perspective of technological innovation and application implementation.
