Source: Talk Outside the Words
Since the days following the Fed's interest rate meeting (December 19, Beijing time), as the market experienced a phase adjustment, many people began to panic. Coupled with some KOLs seizing the opportunity, stating that the market would head towards $80,000 or even lower prices, some friends chose to exit once again and gave up their holdings under such circumstances.
In the articles from recent days, we generally still recommend that everyone should try to manage their positions and remain calm and rational. For example, in the article about market conditions from a few days ago (December 22), we outlined 4 bullish factors and 3 bearish factors, and mentioned in the article: the probability of Bitcoin dropping below $90,000 this month should be low, unless a new black swan event or significant negative news occurs.
In the past few days (December 19-26), Bitcoin's fluctuation range was about 13%, and it's unclear how many people were thrown off during this fluctuation.
To briefly review the recent articles on market topics, we have actually organized quite a few dimensions of thought, including:
- In the article from December 24, we outlined 5 aspects of macro factors.
- In the article from December 22, we outlined 7 price influencing factors based on macro and data levels.
- In the article from December 20, we outlined 6 price factors based on intuitive feelings.
The reason for sorting these dimensions is, first, to allow myself to reorganize the related data, and second, to hope that everyone can have a more macro directional understanding and continuously form and improve their thinking based on their own position situation. Otherwise, it may be easy to be influenced by various KOLs or analysts' views, leading to frequent operations that result in losses or panic selling that directly causes you to be thrown off the train. We still say: the short-term trend cannot be predicted, and do not always listen to others' statements to arbitrarily change your position operations. If you cannot strictly follow your trading strategy, then the best operation in these days is to do nothing.
When the public generally holds a bearish view, the market often rises. We will only see Bitcoin reach $110,000 or even higher when the public does not anticipate it. The market is often ruthless and goes against human nature. In this process, only a few fortunate, highly skilled, or sufficiently patient individuals can wait for the day when the flowers bloom.
In less than 6 days, it will be 2025, and the market is still changing in real time 24/7. Currently, it seems that $92,500 to $100,500 should be a relatively good short-term psychological price range for this week, unless a new black swan event occurs that breaks this range in the coming days. If you are looking forward to a new trend, it might be better to wait until the first quarter of next year to see how things develop. These days, it's better to have a good rest.
However, there is no intention to take a break, as we still have several execution plans in the coming days at the end of the year:
Firstly, we plan to officially launch the 4th e-book (Blockchain Methodology) on December 30 (second volume, about 280,000 words), and we are currently working hard to summarize and organize the content.
Secondly, we plan to release a 'Talk Outside the Words 2024 Year-End Summary Album' on December 31, and the images are currently being typeset and designed.
Having talked about the plans, we will continue from the series of topics from a few days ago to look at some more dimensions of thought that can assist in the overall direction judgment of the market:
1. US Dollar Index (DXY)
The Dollar Index (of course, you can also pay attention to the Yen Index, etc.) is one of the macro indicators we regularly focus on. In previous articles from Talk Outside the Words, we also mentioned that typically, a Fed rate cut will lead to a weakening of the Dollar Index, which usually benefits risk assets like stocks, gold, and Bitcoin. In other words, once the dollar weakens, it makes risk assets like Bitcoin more attractive to investors, potentially leading to a new round of price increases for Bitcoin.
Currently, it seems that the dollar is once again approaching a relatively high point in the short term, and there is a certain probability (85-90%) that a reversal may occur. From historical data, Bitcoin and the Dollar Index often exhibit an inverse relationship, meaning: a weakening dollar often leads to an increase in BTC's purchasing power.
Of course, considering that it is currently the end of the year and taking into account various other factors such as taxes, this inverse relationship may not always be so significant. But the basic logic here remains unchanged: as long as the dollar does not weaken, high-risk assets like Bitcoin are likely to experience stagnation or continued decline, unless events occur that can directly influence market sentiment (like the ETF approvals this year or institutions like MicroStrategy continuously buying).
2. Seasonality
Although different people may have different views on the idea of carving a boat to seek a sword, from a certain perspective, historical data often serves as a direct and comprehensive reflection and result of the market and human nature. Therefore, we can appropriately pay attention to the performance of seasonality.
Through statistical data, we can see that since 2015, when Bitcoin rises in November, it often also rises in December.
So let's make a simple assumption. If this seasonality repeats this year, then based on the average performance of about 12% in December from previous years, the theoretical closing price of Bitcoin this December would be around $107,500. This means that unless a new black swan event occurs in the coming days causing Bitcoin to plummet, it won't change the overall trend. Of course, this seasonality dimension is not rigorous enough, as history cannot 100% accurately represent the present and the future; we should take it as a simple reference.
3. Global Money Supply (M2)
Compared to the DXY mentioned above, the data reflected by M2 may be more macro-oriented. From the current M2 situation, since September of this year, global money supply has begun to shrink, and the year-on-year growth rate is slowing, indicating some downward pressure. As shown in the figure below.
Moreover, we can also find that high-risk assets like Bitcoin respond strongly to changes in liquidity. However, due to the inherent lag in this data indicator (i.e., Bitcoin's response to changes in M2 typically lags by about 2-3 months), we can only use liquidity contraction as one of the auxiliary judgment indicators for trend changes.
Currently, speculation suggests that in the first quarter of 2025 (roughly starting in February or March next year), we may experience some new changes in market conditions (note that this refers only to changes and cannot determine the specific extent). However, during this period, we may continue to face a period of adjustment (approximately 5-8 weeks), and it is also possible that Bitcoin will attempt to challenge new ATHs (for example, around the $110,000 mark) during this adjustment period. This mark is also the second operation we originally planned, and if reached, we will sell another 10% of our holdings. This is not meant as any operational advice; DYOR.
Of course, this is only a judgment based on the single historical data dimension of M2. We may also need to consider other factors comprehensively, such as the Fed's monetary policy shift or large-scale adoption by institutions, which could also cause Bitcoin to decouple from M2 in some way.
To sum it up, it still comes down to this: the short-term market cannot be accurately predicted. If you hope to make quick profits through short-term operations, you need to combine various factors you consider effective (such as macro expectations, policy expectations, indicators, news, etc.) to execute your risk strategy. But if you consider from a longer time dimension (ignoring the intermediate volatility process), today's Bitcoin is still the cheapest.
At the end of the article, let's take a look at the current distribution of Bitcoin wallet addresses and see where you currently stand:
- There are 50.17 million addresses holding 0-0.1 BTC.
- There are 4.31 million addresses holding 0.1-10 BTC.
- There are 150,130 addresses holding 10-1,000 BTC.
- There are 2,050 addresses holding more than 1,000 BTC.
What we really need to do is just one thing: set a phased long-term goal for ourselves and strive to become part of the two groups of data shown in the picture above.