Bull market in geopolitical crisis: Why is BTC still hesitant despite multiple positive factors?

Original title: Blofin Whales' View: War, Gold and Crypto

Original source: Blofin

The increase in global uncertainty is one of the main reasons for the continued improvement in liquidity levels in the crypto market in recent times, and is also an important reason for the recent strong performance of Bitcoin.

Due to the lack of safe-haven properties, the performance of altcoins depends more on changes in macro liquidity and the gaming status of on-site funds.

Altcoins have gained some advantages in the liquidity competition compared to ETH, which has further adversely affected ETH's performance.

Bull market amid geopolitical crisis

After the release of the US non-farm payrolls data last week, the "lower-than-expected rate cut" seems to have been gradually accepted and digested by investors.

This week, central banks, led by the European Central Bank, will also announce their latest interest rate decisions. Although Europe has performed much better than the United States in terms of inflation and the ECB has higher expectations for rate cuts, given the ECB's weaker influence relative to the Federal Reserve, it is certain that the speed at which global cash liquidity returns to risky asset markets will slow down in the future. For the cryptocurrency market, the bull market may be more "mild and lasting."

However, reality does not seem to be the case. The return of cash liquidity within the cryptocurrency market has accelerated significantly since early April. Over the past week, the entire cryptocurrency market gained nearly $3 billion in cash liquidity, with overall cash liquidity returning to levels seen during the same period in Q3 2022. Affected by this situation, the prices of BTC, ETH, and other altcoins have received strong support, and market sentiment has recovered significantly. What caused the abnormal changes in cash liquidity?

Let's take a look at the performance of other assets. While Bitcoin hit a new all-time high, gold prices rose by more than 25% in 6 months, also breaking through all-time highs. At the same time, the prices of silver and copper are also close to their highest points in nearly a year. Rising gold prices are usually associated with risk aversion. As a long-standing "hard currency", gold is an important hedge against rising macro uncertainties, especially in the context of geopolitical tensions.

However, things get interesting when we look at the price trends of silver and copper. Silver and copper are important military and strategic materials that are closely related to weapons production and the defense industry. Therefore, to some extent, the rapid rise in silver and copper prices is also another reflection of the risks of geopolitical conflicts and macro uncertainties.

So, are there more clues like this? Of course there are! Crude oil prices have risen by more than 20% since the beginning of 2024. The prices of strategically important commodities such as coffee have also soared due to increased demand and tight supply chains caused by the geopolitical crisis.

Risk aversion is never reflected in just one asset; when uncertainty arises, people will exchange cash for "safe hard currency" or raw materials. This is an important reason for the rise in commodity prices such as gold, crude oil and coffee, and of course, it is also one of the reasons for the rise in the prices of cryptocurrencies such as Bitcoin.

BTC: Will it rise further?

Considering the escalation of geopolitical tensions in the Middle East and Eastern Europe, the risk aversion demand of global investors is unlikely to be effectively alleviated in the short term. Therefore, risk aversion will strongly support the demand for BTC. At the same time, although the return of cash liquidity is expected to slow down, liquidity tightening is unlikely to happen again. Therefore, the scale of liquidity locked in the spot BTC ETF will remain relatively stable. In the long run, the return of future liquidity will also steadily push up the price of BTC.

Traders in the options market hold similar views. Although investors' intraday bullish sentiment has weakened due to short-term fluctuations, investors' bullish sentiment on BTC remains stable and dominant in terms of outlook and prospects. However, compared with March, investors' expectations for BTC's medium- and long-term performance have slightly declined, and the weakening expectations of lower interest rates may be one of them.

Based on the latest Gamma exposure distribution, BTC prices appear to be showing some signs of stabilization as the “asset allocation cycle” comes to an end. BTC price may find some support near $63,000 to $65,000. However, if BTC price rises further, it will encounter some resistance around $74,000, which will increase significantly as the price rises.

It is worth noting that the latest implied volatility data shows that traders are still relatively cautious about BTC price performance. Facing the upcoming BTC halving, despite the relatively low level of macro uncertainty and the reduced pricing of tail risk levels, traders still expect BTC prices to have a 7-day price volatility range of 9.27% ​​and a 30-day price volatility range of 20.74%.

Considering that the bullish sentiment among investors is still high, in an ideal situation, the BTC price may still break through $80,000. However, volatility is never one-way; we cannot ignore the possibility that the BTC price may fall below $65,000.

Traders' caution seems justified. In the spot market, although the number of whales holding more than 1,000 BTC is still increasing, the overall growth of whales holding more than 100 BTC has stagnated, which means that purchasing power is weakening. Overall, although holding BTC is still a better choice in the medium and long term, the rise in BTC prices may gradually stabilize as the "asset allocation cycle" temporarily ends.

Non-BTC currencies: internal game

Compared with BTC, ETH is not so lucky. The probability of the spot ETH ETF passing is gradually becoming slim. Even the most optimistic ETH investors have gradually accepted that the negotiations and games around the spot ETF will be long-term. The performance of ETH depends more on the reconfiguration of liquidity within the cryptocurrency market and the changes in the macro liquidity level within the cryptocurrency market.

From a macro perspective, traders remain optimistic about ETH's long-term performance, benefiting from the expectation of interest rate cuts. However, similar to BTC, the weakening of interest rate cut expectations has also had a negative impact on ETH's future performance expectations, which is reflected in the changes in the annualized premium of ETH futures.

Although investors have priced in relatively high price changes in ETH (9.94% in 7 days and 21.5% in 30 days), from the perspective of the latest Gamma distribution, investors are more likely to worry about volatility from falling prices than from rising prices. If ETH price shows a downward trend, it can only get some support after falling to about $3,300.

Compared with the resistance in the upward range, the support on the downward path appears "insignificant". Unless there are enough positive events in the current market operation mode based on "liquidity reallocation", the hedging behavior of market makers will make it difficult for ETH prices to break through and stabilize above $3,700.

Fortunately, ETH whales seem to have slowed down their spot sales. Under the influence of projects such as Ethena, staking for profit has become a relatively more profitable business, and traditional covered call strategies have also gained favor again when price increases slow down. However, this only means that whales remain "neutral" in the price game for the time being.

For speculators, when ETH prices are weak, it seems more appropriate to invest in other currencies with greater potential, which further has an adverse impact on ETH's performance. ETH's market share once fell below 16%; despite the recent recovery, ETH's market share has still shrunk significantly compared to last month. Considering that BTC's market share has not changed much in the past month, it is clear that altcoins have gained some advantages in the liquidity competition with ETH.

In general, holding ETH is not a "bad strategy"; for whales, ETH's rich interest income channels can still bring relatively stable and substantial returns. However, for investors seeking breakthrough returns, considering the current leverage level and the relatively low speculative sentiment reflected by altcoins, it seems more appropriate to follow the pace of liquidity reconfiguration in the cryptocurrency market.