Yesterday witnessed history as Bitcoin first broke the $100,000 mark, soaring to $104,000 at one point, and the market was jubilant, with investors eagerly anticipating an epic bull market.
But while most investors were immersed in dreams, violent fluctuations began, instantly evolving into a bloody massacre, with Bitcoin's price plummeting in a straight line, quickly dropping to around $91,000 within minutes, and the futures contract market saw over $1.1 billion in liquidations. As of the time of writing, BTC's price has rebounded to above $97,000. This spike did not affect other altcoins.
Many contract users went bankrupt within just a few hours due to market fluctuations. The rapid decline of Bitcoin caught many originally optimistic long investors off guard, which is why I always say I do not recommend contract trading; the risk of long positions during a bull market is already very high.
Why did Bitcoin plummet sharply this morning?
1. De-leveraging major cleanup: The market needs liquidations, pullbacks, and reasonable corrections.
The market will not always rise or always fall; a current pullback is healthier. Yesterday, after breaching $100,000, the market's FOMO sentiment surged, with Bitcoin's funding rate skyrocketing to 0.1%, and borrowing rates reaching an annualized 80%. This is not healthy, and yesterday's article (BTC Breaks $100,000! What Factors Are Driving the Surge? Amidst the Rally, Beware of a Correction! Is This the Last Chance for Retail Investors?) also reminded everyone to reduce positions appropriately.
Such large-scale liquidation events also have positive significance, as they can effectively lower overheated funding rates, reduce leverage positions in the market, cool down the market, and pave the way for subsequent rebound trends.
2. Long-term holders are beginning to take profits.
After Bitcoin broke the $100,000 barrier, long-term holders began to take profits. The Long-Term Holder Spent Output Profit Ratio (LTH-SOPR) indicator shows that the Bitcoin sold by long-term holders has realized profits four times their original purchase price.
Be cautious when Bitcoin reaches $100,000, as profit-taking may occur. Additionally, market concerns about the macroeconomic environment and regulatory policies may exacerbate market volatility. However, this is also a relatively normal phenomenon in a Bitcoin bull market, and the current level of profit-taking remains within a healthy range.
3. Over 20,000 Bitcoins transferred from Mentougou.
The news regarding the transfer of over 20,000 Bitcoins from Mentougou became the focus of market discussion yesterday. Today, it transferred another 3,000 Bitcoins. Although this news has attracted considerable attention, the impact of Mentougou has long passed. It is expected that this transfer of over 20,000 Bitcoins is merely a repayment behavior and will not trigger a concentrated sell-off in the market. In the short term, it may cause some impact, but the last 20,000 Bitcoins under the current BTC ETF are not enough for the ETF to absorb in three days, so the impact of this rumor on Bitcoin's price may be overestimated.
4. Tonight's non-farm data.
Tonight, the U.S. non-farm payroll data for November will be released, with the unemployment rate and wage levels being figures that the world is watching closely. A low unemployment rate and high wages indicate a strong U.S. economy, but this could reduce the likelihood of the Federal Reserve cutting rates in December. Conversely, a high unemployment rate and low wages, which are current market expectations, may increase the probability of rate cuts by the Federal Reserve but could also suggest that the U.S. economy may not be as stable as imagined, especially if the unemployment rate rises, potentially triggering new concerns about economic recession in the market. Therefore, it cannot be ruled out as a reason for a pullback.
In short, during a bull market, everyone should trade contracts less. Last night, Bitcoin flash crashed from around $104,000 directly to about $90,000, a drop of over $10,000, mainly clearing long leverage positions. Earning money in a bull market is easy, but if risk awareness is weak, losing money is even easier.
Bitcoin experienced a violent crash last night; it is obvious this was intentional manipulation, with a clear goal to liquidate long leverage positions, lighten the load for a new assault, and a bit of cleansing is healthier.
It is also worth mentioning that Bitcoin's flash crash did not affect altcoins, which is a clear sign that the altcoin bull market has truly arrived.
The resilience of the altcoin market is evident.
Interestingly, although Bitcoin's decline brought short-term shocks to the market, altcoins (such as Solana, Ethereum, Dogecoin, etc.) have shown strong resilience and are currently not following the decline, even rebounding sharply. This also indicates that every time Bitcoin experiences a violent drop in a bull market, it will likely be a greater probability of good news for altcoins.
Bitcoin's dominance has dropped from a high of 62% to 53.8%.
In conclusion, despite the significant market volatility, the overall potential of the cryptocurrency ecosystem still exists. Investors are gradually realizing that apart from Bitcoin, other digital assets may also achieve sustainable growth in the long term, and the altcoin season is still gaining momentum. Therefore, although market sentiment is affected by fluctuations, the investment demand for quality tokens remains strong.
Looking ahead, we can pay attention to the AI sector: Elon Musk's XAI AI company has signed an order with NVIDIA for AI servers worth $1.08 billion, which will be delivered in January. It's a tight schedule with significant tasks. BlackRock believes that the AI boom next year will continue to drive U.S. stocks and boost economic growth. From the comments of these crypto magnates, we can see that the AI sector in cryptocurrency is likely to experience a surge after this year's second half of sluggishness.
RWA, AI, SOL, meme, ton, and sui are all topics that cannot be avoided in the new round of the cryptocurrency market. They will be mentioned and speculated on from time to time. What we need is just patience; rotations will happen.
Recently, there has also been news regarding AI, such as OpenAI conducting 12 live broadcasts within the next 12 days. If they release innovations similar to GPT-3.5 at the end of 2022 or Sora at the beginning of 2024, it could trigger another AI frenzy, potentially boosting the AI sector. Therefore, in the coming month, we can focus on AI sector projects!
Finally, let’s talk about tonight's non-farm payroll predictions:
Last night, there was a big spike in the second half of the night, and it is generally unlikely that there will be consecutive big spikes tonight. Otherwise, it would become a 'pig slaughter' scheme. Medium and small indicators need to be repaired. Currently, it seems the repair is also quite fast. I bet that not only is it impossible to have a big spike tonight, but there will also be a violent surge.
If the non-farm data is bearish, then there will be no interest rate cuts this month, and the trend may turn bearish. Clearly, this is not very likely at the moment. So tonight, just buy on dips normally. Later, I will update the low buy points for tonight in the group. Today during the day, if it rebounds to the target profit point, first take profit on 1/2-2/3, and leave the large floating profit positions intact.
