Global financial markets were calm in March.
The Nasdaq and Dow Jones indexes both hit new highs without any suspense. The Nasdaq has risen for five consecutive months, indicating that long capital is continuously increasing its tolerance for the delay of the US interest rate cut.
There are many factors that have led to the delay in interest rate cuts.
The US CPI rebounded slightly from 3.1% to 3.2% month-on-month, and the US manufacturing index PMI rebounded to 50.3%, showing a trend of entering an expansion period. Japan ended its eight-year era of negative interest rates and raised interest rates for the first time.
The probability of a US interest rate cut in April has dropped significantly, and the probability of a rate cut in May has also fallen below 50%.
The U.S. dollar index continued to rebound in March, rising to 104.49 by the end of the month.
Gold prices hit a record high, and BTC prices hit a record high.
The accumulation of capital returning to the United States has pushed up both equity and safe-haven markets.
Meanwhile, the U.S. government's spending on national debt has reached $1.1 trillion in the past 12 months, doubling since the COVID-19 pandemic. Bank of America pointed out in its report that if the U.S. government fails to cut interest rates by 150 basis points in the next 12 months, its interest costs will rise to $1.6 trillion. By the end of this year, interest on U.S. debt will become the largest expenditure item for the U.S. government.
This is the price paid for the increase in U.S. Treasury bond issuance and the delay in interest rate cuts, and is also one of the deep reasons why the market is betting that the U.S. government will cut interest rates as soon as possible.
The United States cuts interest rates, macro-finance enters a period of easing, and the equity market and crypto market enter a new round of rising cycle.
This is the most eye-catching point for global investors and is also closely related to the crypto asset market.
Currently, the market is postponing the expectation of interest rate cuts to the second half of the year. Whether in the U.S. stock market or the crypto market, some funds have begun to lock in profits and leave.
Crypto Market
In March, BTC opened at $61,179 and closed at $71,289, up 16.53% for the month with an amplitude of 23.88%, achieving seven consecutive months of growth, and the trading volume was also the highest in mid-July.
Throughout March, BTC remained within the rising channel of the "rising period". March 13 was the turning point of the mid-term trend. On that day, BTC hit a high point since this round of bull market, and then the overall volume showed a downward trend. After hitting the 30-day moving average and rebounding on March 20, the volume failed to activate again, indicating that the long and short sides were in a stalemate.
BTC has been rising for 7 consecutive months, tying the historical record. Both long and short positions have accumulated a large amount of unrealized profits. As the rising futures price rises, the scale of selling to lock in profits has become one of the focuses of market attention.
The game between inflow funds and the scale of BTC selling has become the dominant factor affecting BTC prices in the short and medium term.
Big Sell
We understand the bull market as a market phenomenon in which new participants bring in funds to buy chips under the background of abundant funds, which drives the original holders to sell. For long-term BTC investors, the bull market is a time for strong selling.
In this cycle, December 3, 2023 was the highest point in the history of long-term holdings, when they held a total of 14,916,832 BTC. Since then, with the gradual start of the bull market, long-term holders have started a four-year cyclical sell-off, and as of March 31, a total of 897,543 BTC have been sold.
It starts with long-term selling and ends with short-term buying. The two maintain a dynamic balance.
During the rising phase, when new inflows of funds control the pricing power, the main buying volume pushes prices up and achieves balance.
During the rising period, when BTC long sellers control the pricing power, the main selling volume pushes the price down to achieve balance.
There is also an important sub-group of participants - short-term profit-takers, which will also become an important reason for driving prices down during the rising period.
This continuous, large-scale selling is the fundamental reason for the decline in BTC prices from March to April. This is the first round of large-scale selling after entering the bull market. The sellers have the pricing power, which has hit the bulls' enthusiasm for buying, causing prices to fall and locking in a cumulative profit of US$63.1 billion.
During the rising period, whether selling to lock in profits will lead to a price drop depends on the comparison of the power of the long and short parties. In the early stage of selling, the seller is only tentatively selling, and the price will continue to rise, so the seller continues to increase the scale of selling, which eventually leads to the consumption of the ammunition of the long army, causing the price to fall. After the decline, due to price reasons, the seller begins to reduce the scale of selling, and the buyer's power continues to recover, which in turn pushes the price up again. The two sides continue to play games in the rise and fall of prices until the next selling range.
During the entire rising period, similar games often occur several times. After multiple sales, most of the chips enter the short-hand group, and liquidity becomes increasingly flooded, which makes the buyer power eventually lose in the long-short game, and then the bull market ends.
Currently, the selling force is waning significantly, but it is not over yet. Although the price is difficult to predict, the first wave of selling in the bull market is coming to an end. This wave of large-scale selling before the production cut cleared a large number of profitable chips, raised the cost center of gravity of BTC, and helped to increase the price in the next stage.
liquidity
The trend of stablecoins turning from outflow to inflow in October 2023 is cyclical. This trend is the main external factor for the start of the bull market, and due to its cyclical nature, it will not end in a short time.
Throughout March, a total of $8.9 billion flowed into the stablecoin channel, setting a monthly inflow record since this cycle. This inflow is the basic support for BTC prices to set a historical record this month, and is also one of the undertakers of selling BTC.
The circulation scale of stablecoins has not yet reached the peak of the last bull market, and the subsequent inflow scale and rate need to be closely monitored.
Since the United States approved 11 BTC ETFs in January this year, funds from this channel have also become one of the important factors affecting the market.
From the observation data, we can see that the BTC ETF did not experience large-scale outflows during this round of large-scale selling adjustments, and only recorded small outflows from March 18 to March 22.
Based on the inflow and outflow analysis of BTC ETF, we judge that the funds in this channel have only been reduced in a short period of time, with a scale of about US$1 billion. This amount of funds is still small compared with the locked profits of up to US$63.1 billion, so it is not the fundamental reason for this round of adjustments.
Funds continue to flow into the BTC ETF channel, which is one of the important supports for the subsequent recovery of BTC prices and setting new highs.
The growth in capital supply is the direct reason for pushing prices upward, and the continued growth in capital supply is the direct reason for the launch of a bull market.
Based on the market structure, this kind of selling is a normal phenomenon during the market's upswing; based on the inflow of funds through stablecoins and ETF channels and the adoption of application chains, there will be fluctuations in the market outlook. This round of crypto bull market is unfolding in an orderly manner, and long-term investors should actively go long on a cautious basis.
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