Today is January 3, 2025, Friday. Bitcoin has experienced three consecutive days of rising, peaking at $97,800. Meanwhile, the 20-day moving average is about to cross below the 50-day moving average, which could lead to the formation of a death cross. Due to the rapid convergence of these two lines, Bitcoin needs to stay above $97,600 to confirm the sustainability of this upward trend.
In recent weeks, influenced by the Christmas holiday, Coinbase has continued to show a replication pattern. The CEO of Cryptocont mentioned that old whales are selling Bitcoin, particularly after Bitcoin prices reached high levels, making this trend quite obvious. If new whales are taking over these Bitcoins to sell to retail investors during a larger future rise, we know this is a continuous process, and ultimately, the newly entered retail investors will be trapped at the bottom. The continued decline of Bitcoin in a bear market ultimately forces retail investors to relinquish their holdings, while old whales buy at low prices to prepare for the next cycle's onset.
Bitcoin's recent rebound is accompanied by a rapid narrowing of the bid-ask spread, indicating that U.S. investor demand, particularly from institutions, is reviving. I see this as a positive sign. Previously, the softness of U.S. market demand was viewed as a potential risk. With the return of U.S. market demand, support for Bitcoin's price is expected.
From the chip distribution chart, $97,000 remains an important price threshold. During the previous consolidation process, a certain level of support has also formed below. The worst-case scenario would be a drop below $90,000, which would lead to testing the average price line of short-term holders. Currently, the Bitcoin market still appears relatively stable.
Notably, Bitcoin spot ETFs saw significant net inflows last December, most of which occurred in early December. Ethereum spot ETFs saw inflows of over $2 billion in December, setting a new historical record. However, in terms of price performance, Bitcoin only fell 3% in December, while Ethereum dropped 10%. Given Bitcoin's dominance, if they continue to move downward, the altcoin market is expected to recover in the first quarter.
The development of cryptocurrency spot ETFs is still worth paying attention to, especially their potential profound impact on the market within the next 12 months. Looking back at January 11, 2024, the listing of Bitcoin spot ETFs in the U.S. can be regarded as a historic event. They have not only become one of the most successful investment tools in the capital market but can also be said to be the most successful ETFs in history, especially with BlackRock's IBIT reaching a market cap of $51.5 billion. This contrasts sharply with market expectations for the initial performance of spot ETFs.
About a year ago, some opinions suggested that the speed of capital inflow into Bitcoin ETFs might be limited, similar to the development trajectory of gold ETFs, which would need a long incubation period to gradually gain scale. However, after its launch, Bitcoin ETFs showed extremely high attractiveness and growth momentum, reflecting Bitcoin's unique appeal and further boosting confidence in the recent bull market.
From the annual main chart of Bitcoin, a clear market cycle pattern has emerged, indicating that Bitcoin will experience three years of rising followed by one year of decline. This pattern repeats itself. Currently, we are in the final year of the three-year rising cycle, so at some point this year, Bitcoin is expected to reach its bullish peak. We need to gradually sell off our Bitcoin holdings. Of course, uncertainties in the external environment, such as geopolitical conflicts or economic fluctuations, may disrupt this trend, but overall signs still lean towards a positive outlook.
Previously, we always discussed the U.S. dollar index, which is an important variable affecting the Bitcoin market. The strength or weakness of the dollar often has an inverse relationship with Bitcoin's performance. When people seek safe-haven assets, the dollar is usually the first choice, especially in the context of attractive U.S. Treasury yields. As Treasury yields exceed inflation rates, investors can gain positive returns, leading more safe-haven funds to flow into the dollar, while a strong dollar usually suppresses capital inflow into Bitcoin. Currently, the dollar index is above 109 points, a new high in the past two years, reflecting the strong performance of the dollar.
Theoretically, a strong dollar usually puts pressure on Bitcoin. However, since October 2024, Bitcoin has not significantly declined alongside the strengthening dollar; instead, it has shown a rare phenomenon of rising in sync with the dollar. I believe this illustrates that while the dollar is strong, market demand for Bitcoin remains robust, and the momentum of capital inflowing into Bitcoin has not shown significant signs of weakening. Of course, this synchronized rise is a positive signal, indicating that the Bitcoin market still has appeal; on the other hand, it reflects the current complexity of the market. Bitcoin's ability to maintain growth despite a strong dollar may be due to the globalization of cryptocurrency assets and recognition of Bitcoin's long-term value.
A strong dollar is often accompanied by an extended duration, and as this upward trend continues, the likelihood of a trend reversal for the dollar also increases. If the trend ultimately reverses, it would be very beneficial for Bitcoin. For example, Bank of America recently pointed out that the current strength of the dollar is somewhat excessive; from a historical perspective, the dollar appears to be overvalued, making a correction or trend reversal almost foreseeable.
In the current macroeconomic context, the U.S. debt ceiling issue is one of the core topics of high market concern. At the end of last year, U.S. Treasury Secretary Yellen issued a formal warning to Congress, stating that the U.S. would reach a new debt ceiling between January 14 and 23, very close to the inauguration date of the new Congress, which is set for January 20. Therefore, the market generally believes that formal negotiations on the debt ceiling may quickly commence after the new Congress is inaugurated.
Trump's inauguration itself is also one of the important observation points for the market, especially as there may be potential cryptocurrency policy-related content in the executive orders. Globally, on January 24, the Bank of Japan's interest rate decision has also become a focal event, with the market predicting that Japan will raise rates by 25 basis points, bringing the benchmark rate to 0.25%. This is the highest level since 1995, which may indirectly impact the cryptocurrency market. Back in early August last year, the Bank of Japan's previous rate hike triggered large-scale yen arbitrage transactions to unwind, causing tremors in the global financial market, and we need to keep an eye on this trend in January.
Additionally, the Federal Reserve's interest rate decision on January 29 is also highly anticipated, with the market expecting rates to remain unchanged. However, since Trump's election, the dollar index has surged significantly, and this trend is quite similar to the market performance following Trump's initial election in 2016, when the dollar index faced adjustments after a rapid rise. Therefore, the current upward trend of the dollar index may also encounter similar resistance. Given the interrelationship between the dollar index and Bitcoin's price, if the dollar index experiences a pullback, I believe the Bitcoin market may benefit.
The European MiCA cryptocurrency regulatory framework is gradually having a profound impact on the market. The market share of USDT has been affected to some extent, with some opinions suggesting that the potential uncertainties surrounding USDT contributed to Bitcoin's price failure to rebound by the end of 2024. Nevertheless, USDT still maintains a high market cap and good stability, dominating the stablecoin market.
It is worth mentioning that some mainstream exchanges, especially Binance, saw stablecoin reserves reach a historic high, usually viewed as a signal of increased buying interest, indicating enhanced market liquidity, which is typically bullish for the market. However, current trading volumes have not fully recovered, and market participation still needs to improve. The CDD index continues to climb, reaching its highest level in six years, with long-term holders transferring a large amount of Bitcoin, while short-term buying power appears somewhat lacking, causing Bitcoin to struggle to shake off its sluggish trend, though the market is gradually recovering. With the return of U.S. investor demand, Bitcoin may achieve further rebounds.