The global financial market has recently fallen into a man-made panic that "the U.S. economy is about to decline." The main reason is that the PMI index released by the United States has fallen into recession for two consecutive months, which overlapped with the massacre on August 5, strengthening the panic of the main force to continue selling risk assets. , causing the recent performance of both the cryptocurrency market and U.S. technology stocks to be quite poor, the media has also followed this "recession" theme in an attempt to amplify price fluctuations.

The first to bear the brunt is the AI ​​stock with the highest growth rate in the United States, which belongs to the market capitalization sector with the highest leverage. Currently, the market is going crazy shorting AI stocks. The force is so strong that even cryptocurrency concept stocks and Bitcoin spot ETFs have been negatively affected. For example, Coinbase stock fell from US$240 to US$150, and the prices of mining stocks and other cryptocurrency concept stocks also fell. Finally, confidence in Bitcoin ETFs was also eroded, and the price of Bitcoin fell with the net inflow of funds.

Although the overall situation is controllable, traders are not too panicked because the fluctuations of Bitcoin are not as exaggerated as imagined. The overall situation is still gradually declining, from the previous $64,000 to $62,000 and $59,000. to US$57,000, and finally fell to a minimum of US$53,300; Ethereum also performed poorly, with the price once falling below US$2,200, which represented the trading sentiment of a gradual outflow of funds. This is not a good sign, and a slow decline is the best time for trading. Painful stage.

We believe that the market has entered a stage of slow decline, and user confidence is quite low. There is not much possibility of a strong rebound in the short term. Even if the Fed cuts interest rates, it may not be able to help much, because the main reason for the decline is the structural decline in trading sentiment. It is not that the market has mispriced risky asset prices. The only possibility left is for the Fed to radically cut interest rates by two points. However, this is unlikely. The Fed still has a high probability of adopting a conservative strategy of cutting interest rates by one point and observing more economic data.

But is the market really bad? Originally, institutional investors and hedge funds did not pay attention to the overall economic data at all, but last week they returned to hype the economic panic of "recession in the overall economic data". Coupled with the withdrawal of buying orders, both stock and cryptocurrency prices fell, and these media The hype is indeed effective, and trading sentiment is heading in the direction of deterioration. Next, we will continue to explain the current market situation.

Sources: MICA RESEARCH A. September 03 Layer-2 transactions rise, Ethereum node fee income plummets

Since March 2024, the revenue of the Ethereum Layer-1 network has plummeted 99%. The main reason is that the number of monthly users and daily transaction fees of the Layer-2 network have increased significantly, taking away the original Ethereum node revenue. According to data from Token Terminal, Ethereum network handling fees reached the highest point of the year at $35.5 million on March 5, 2024. With the Dencun upgrade going online on March 13, the improved structure enabled Layer-2 transactions to Fees were significantly reduced, and overall network costs began to decline steadily.

The Dencun upgrade has triggered explosive growth in Layer-2 expansion solutions. There are currently 74 Layer-2 projects and 21 Layer-3 projects in operation. Past currency issuance and short transactions have been changed to Layer-2 operations, so there is no need for So many main chain transactions. Anoma CEO Adrian Brink believes that the number of Layer-2 solutions on the market far exceeds demand, about 10 times the real demand. Intense competition has led to price wars among Layer-2s.

Therefore, users do not necessarily need to settle on the Ethereum main chain, which further reduces network fees. In addition, the low transaction costs introduced by Dencun offset the deflationary pressure brought by EIP-1559, resulting in a reduction in the demand for Ethereum. Since the upgrade, the supply of Ethereum has Volume continues to grow. The transaction costs and lack of demand at these historical lows caused the price of ETH to fall below $3,000, but it was also in line with the original design goals of Layer-2 at the time to ease the main chain transaction volume, reduce transaction costs, and increase penetration.

B. September 04 The U.S. manufacturing PMI index has declined for two consecutive months, raising concerns about recession.

S&P Global announced yesterday that the U.S. Manufacturing Purchasing Managers Index (PMI) in August fell for two consecutive months, falling from 49.6 in July to 47.9, both below the warning value of 50, indicating that the U.S. manufacturing industry has insufficient confidence in its future prospects. It was also worse than market expectations of 48, with manufacturing output falling for the first time in seven months as weak demand caused companies to scale back output, according to monthly surveys.

S&P Global Chief Economist Chris Williamson commented that the August PMI index declined for two consecutive months, which shows that the manufacturing industry may have a negative impact on the economy in the third quarter and will intensify in the coming months. It also shows that the U.S. Fed is The necessity of cutting interest rates in September, as PMI involves the manufacturing industry's confidence in future equipment investment, US chip stocks suffered the most severe bloodbath yesterday.

The Fed will hold an FOMC interest rate meeting on September 17. The market is currently speculating how much the Fed should cut interest rates. The next data point is the August non-farm payrolls report to be released on the 6th. Assuming that employment does not deteriorate further, the interest rate cut may be only There is one code, which may expand to two codes if the situation is not ideal. The encryption market will benefit from this, and the price of Bitcoin only fell from US$59,000 to US$57,000. The impact is far less severe than that of technology stocks.

C. September 05 Arthur Hayes: Bitcoin may not rise after the interest rate cut, and the worst may fall slowly to $50,000

BitMEX co-founder Arthur Hayes said in his latest blog post that he predicts Bitcoin could fall to $50,000 in the worst-case scenario, citing the impact of macroeconomic pressures and rising bond yields. Having a negative impact on the price of Bitcoin, he believes that the U.S. government continues to carry out easing policies in order to vote for votes and avoid economic recession, and the Fed actually does not do much to combat inflation.

Therefore, the interest rate cut in September will not necessarily lead to a decline in U.S. bond yields. On the contrary, it may rise because the government expands bond issuance to raise funds to stimulate the economy (too much issuance causes prices to fall). He previously believed that the September interest rate cut will bring a new trend to Bitcoin. The wave is rising, but he has now changed his mind. Although he is still bullish on Bitcoin in the long term, this is without leverage. In the short term, his prediction accuracy will be about the same as tossing a coin.

In this regard, he also hinted that traders will reduce leverage positions. The short term is very difficult to predict. Bitcoin may fall to $50,000 at worst, and other altcoins may suffer even greater losses. Despite the pessimistic outlook, Hayes is still bullish on Bitcoin and some altcoins in the long term. He believes that the Fed will eventually solve all problems by printing money, which will be beneficial to Bitcoin and other risk assets.

Capital sentiment has turned conservative and cautious, and we are waiting for the release of more general economic data in the short term.

Last week, the August manufacturing PMI index, the "small non-farm" ADP employment report, and the August non-farm employment report were announced. In addition to the continued sluggish PMI index, ADP and non-farm employment were actually not as bad as imagined, while the U.S. manufacturing industry The index itself does not have much reference for the consumption-oriented U.S. economy. We believe that this wave is more like a deliberate killing by the market. The fundamentals behind it have not changed. It is more about creating a real recession. illusion.

But what about a recession? The Fed has a higher chance of adopting a faster rate cut strategy. Currently, it has cut interest rates by one point in September, and it may drop even faster in the future. It may drop to a neutral interest rate of 3.5% in the next two years, officially breaking away from the constraints of the Fed facing high inflation. If interest rates rise, Bitcoin will definitely rise by then. We believe that the long-term price of Bitcoin is still bullish. In the face of economic recession, the Fed can solve the economic recession at any time through easing policies.

At present, Americans still have a lot of money in their pockets. It’s just a matter of whether they are willing to use it for consumption or investment. The overall currency stock is still considerable. The current price of Bitcoin is undervalued. We believe that US$70,000 is a reasonable price. , but in the short term, Bitcoin may fall to the price of 50,000 US dollars. Users suitable for long-term investment enter the market and slowly accumulate chips. There may be a big special price in September. It is a better strategy to avoid leveraged transactions as much as possible.

Continuing the previous argument, the subsequent market fluctuations will be very difficult to predict, and the interpretation of various indicators will be very different. In the end, it depends on which party is stronger. In the absence of objective market standards, traders will be difficult to single-bet on the same market. In one direction, for example, the next data point is the price index (CPI) in August. If nothing unexpected happens, inflation will continue to slow down, and even oil prices have collapsed recently, and inflation may fall further.

At this time, the price of Bitcoin will rise again in the short term, but whether it can continue depends on the subsequent general economic data. The long and short factors are too complex and difficult to predict, and the difficulty of market transactions will rise sharply. It is safer to reduce leverage. , as investors turn to observing the general economic index, they must follow the market in order to earn returns and avoid being offset by the fluctuations of small and medium-sized currencies.

We believe that Bitcoin will be a better choice than Ethereum, which has recently lost a lot of funds due to the decline in staking rewards. We misjudged the loss of fee income caused by the Ethereum Layer-2 airdrop boom and will enjoy a substantial With the stimulating buying brought about by interest rate cuts, Bitcoin will be a more stable investment target. If the subsequent price continues to fall, it will be a good entry opportunity.

Review of last week [MICA RESEARCH] The crypto market has become more complex, investors are waiting for an interest rate cut in September

[MICA RESEARCH] The crypto market is becoming more complex, investors are waiting for an interest rate cut in September

Statement: The article only represents the author's personal views and opinions, and does not represent the objective views and positions of the blockchain. All contents and opinions are for reference only and do not constitute investment advice. Investors should make their own decisions and transactions, and the author and Blockchain Client will not be held responsible for any direct or indirect losses caused by investors' transactions.

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〈[MICA RESEARCH] Negative trading sentiment shrouds, Bitcoin is under short-term pressure〉 This article was first published on "Block Guest".