Author: Xiaoyun, a cryptocurrency trader
In the past week, the market volatility was full of drama, and almost all of the volatility revolved around key macro data. First, the US non-farm payroll data on June 11th exceeded expectations by a large margin, causing Bitcoin to plummet by more than 5%; then, the US CPI data on June 12th was 0.1% lower than expected, and Bitcoin rebounded sharply by more than 5%; finally, the dot plot released by the Federal Reserve on June 13th showed that the interest rate cut was lower than market expectations, and Bitcoin fell again by nearly 5%. In just three days, the market experienced two roller coaster markets, and many trend traders were repeatedly fooled by the main players. This phenomenon also basically verifies a point of view in the previous article: whether to cut interest rates in September has become one of the most important game directions for funds in the second half of the year.
Among the three key macroeconomic trading nodes, the most surprising market reaction occurred after the release of inflation data on June 12. Although the actual consumer price index (CPI) was only 0.1% lower than expected, which is within the reasonable error range, the market still regarded this small difference as a major positive, which shows that the market's follow-up to macro data has reached an almost pathological level. The market's enthusiasm for macro data also shows that in the absence of good crypto narrative logic, the market can only pin its hopes on liquidity easing to open up valuation space. Therefore, for leveraged traders, each subsequent window of macro data needs to be very cautious.
Currently, the interest rate swap market shows that market participants expect the probability of the Federal Reserve to cut interest rates by 50 basis points within this year as high as 90%. However, there are significant differences in market opinions as to whether the first interest rate cut will be implemented in September. In the past week, with the release of a series of macro data, the swap market's pricing of a September interest rate cut has been fluctuating wildly between 50% and 70%. In this context of unclear expectations, if the interest rate cut is implemented as scheduled in September, it will not only mean that the timing of policy easing will be brought forward, but also indicate that the intensity of the easing policy may exceed market expectations. (2-3 interest rate cuts) Of course, once expectations of an interest rate cut in September come to nothing, the market will also react negatively. However, as analyzed in the previous article, the author believes that a rate cut will most likely occur in September, but the market may still experience a strong washout before the rate cut.
Recently, the market has widely discussed the reasons for the absence of altcoins in the current bull market. However, few analyses have focused on the flow of funds and explored why the money-making effect of altcoins has declined rapidly after 2021. According to data from CoinMarketCap and TradingView, Bitcoin's market value has increased from $33 billion in January 2023 to $1.4 trillion in 2024, an increase of 324%. During the same period, the market value of altcoins increased from $85 billion to $350 billion, an increase of 3.11%. Although Bitcoin has set a new high in 2021, the market value of altcoins is close to 85% of its peak in 2021. However, a detailed analysis of the composition of the market value of altcoins shows that of the $265 billion increase, about $100 billion comes from the lifting of the ban on restricted tokens, $60 billion comes from the issuance of new tokens, and the actual market value increase due to the increase in token prices is only $105 billion. That is to say, in the bull market over the past year or so, more than half of the monthly increase in inflows into altcoins was occupied by the lifting of restrictions on old coins and the issuance of new coins.
According to statistics from 10x Research and CoinGecko, the scale of altcoin unlocking is expected to reach $20 billion in the next six months, and nearly $6 billion in new tokens will be issued each month. The contradiction between this dumping supply and limited demand will lead to an increasingly serious liquidity dilemma in the altcoin market.
With more sellers than stocks, it seems unrealistic to expect the market to repeat the altcoin bull market of 2021. Therefore, even if there is an altcoin bull market in the future, it is likely to be a structural market.
Although the lifting of restrictions and additional issuance are unfavorable factors that restrict the rise of altcoins, the $225 billion altcoin market is still insignificant for the blockchain, which is still in a highly prosperous stage. In the future, projects that can be driven by endogenous growth still have room for ten or even a hundred times of growth. In short, a sharp drop in the market is still an opportunity to buy high-quality altcoins at a low price.
When the market enters the stock game stage, the right to speak and the right to set prices will gradually be concentrated in the hands of the group with sufficient funds. In this round of altcoin craze, the biggest winners are undoubtedly PE and VC companies. They will continue to adopt the existing profit model: investing in and incubating new projects, and then listing on exchanges to push up valuations and realize cash. Therefore, short-term trading opportunities will still appear in new coins or sub-new coins. In the past month, the second wave of Binance's new coins has been verified in BB, NOT, and IO, and ZK will probably follow this rule.
