Original author: Arain, ChainCatcher
Original editor: Marco, ChainCatcher
From August 27 to September 7, Bitcoin continued to fall, falling below $60,000, triggering panic in the market. According to Coingecko data, Bitcoin fell from about $64,265 per coin on August 26 to $53,923 per coin on September 7. During this period, the US spot Bitcoin ETF showed net outflows for 8 consecutive trading days, with a cumulative net outflow of about $1.2 billion. The total net assets of the ETF shrank by about $8.8 billion, which is a rare situation since the launch of the US spot Bitcoin ETF.
On the evening of September 9, Bitcoin stopped falling and rebounded. At the same time, Sosovalue data showed that the daily net inflow of US spot Bitcoin ETF turned positive, indicating that market sentiment has improved. However, Trading View technical analysis shows that the market sell signal is still strong.
10x Research, a digital asset research platform, released a research report today predicting that the price of Bitcoin will fall to $45,000. NYDIG, a Bitcoin financial services platform, said Bitcoin investors should prepare for a "seasonal downturn" in September, "because historically, September has the worst average return."
Grayscale Research's report pointed out that the selling pressure from large market institutions has basically passed, Bitcoin's fundamentals are improving, and subsequent price performance needs to focus on the Federal Reserve's interest rate cuts and political changes in the United States surrounding the cryptocurrency industry.
On-chain data shows that risks have not been fully cleared
Judging from multiple indicators on the chain, market risks have not been completely cleared, but the current position may be in the early stages of a bull market.
According to Glassnode data, Bitcoin's 7-day moving average SOPR (Spent Output Profit Rate) has fallen below 1.0, which means that market sellers are still profitable in transactions on the blockchain, but it should be noted that historically, SOPR tends to fall below 1.0 before market consolidation occurs. The current decline is similar to the bear market phases in 2018 and 2019. If SOPR is below 1.0 for a long time, the market may reverse.
SOPR is used to view the ratio between the USD value of a UTXO (UTXO is an unspent transaction output, which refers to the balance in a Bitcoin address) when it was created and the USD value when the UTXO was spent. A ratio of 0 is the dividing line. A ratio above 0 represents an overall profit in transfers between wallets, and a ratio below 0 represents a loss-making sale.
Glassnode released a research report on September 4, pointing out that in terms of the ratio of floating profits to floating losses, profits are still 6 times the total losses, and the ratio is higher than the current value on about 20% of trading days. Short-term holders (STH), who represent new market demand, bear most of the market pressure because their floating losses dominate the market and the loss margin has continued to increase over the past period of time. However, the magnitude of the floating loss relative to the market value shows that the market has not entered a full-scale bear market, but is closer to the volatile period in 2019.
Based on on-chain data pointing to key indicators such as seller risk rate, Glassnode research suggests that market volatility may increase in the coming period.
According to Dune data, the number of active Bitcoin addresses has dropped significantly compared to before this year's halving, which may indicate that market sentiment is cooling.
Based on this, 10x Research said that Bitcoin could fall to $45,000 in this cycle. Markus Thielen, director of the research institute, said that after Bitcoin addresses peaked in November 2023, there was a sharp decline later in the first quarter (Q1) of 2024. "Short-term holders began to sell their BTC in April, while long-term holders took profits, indicating that the market has reached the peak of the cycle."
Dan Tapiero, founder and CEO of 10 T Holdings, said in an interview that based on historical performance, Bitcoin usually performs poorly or has increased selling pressure in September of previous years.
Pay attention to the positive news at the macro level
With the launch of cryptocurrency spot ETFs and the entry of Wall Street funds, the crypto market's trends have become more relevant to the macro economy.
Grayscale Research said in a report on September 3 that the selling pressure from the German government, Mt Gox Asset Management and other institutions has basically passed, and the improvement of fundamentals is expected to improve. At the same time, the research report pointed out that investors need to pay close attention to the US labor market, the Federal Reserve's interest rate cuts and political changes in the United States surrounding the cryptocurrency industry.
The market generally expects that the Federal Reserve will most likely announce its first interest rate cut in September.
Generally speaking, interest rate cuts are good news for risky assets. Boosted by macro news, global risky assets and Bitcoin saw a short-term rise.
The Fed's next meeting is on September 18. It is currently in a quiet period and Fed officials will not publicly express their views on monetary policy unless there are special circumstances.
On September 6, the U.S. Bureau of Labor Statistics released August statistics, showing that the number of non-farm payrolls in the United States increased by 142,000, lower than expected, and the unemployment rate fell by 3 basis points to 4.22%, which was stronger than the expected value of 3.7% and the previous value of 3.6%. The average hourly wage in August increased by 0.4% month-on-month, slightly higher than expected.
Eric Robertsen, global chief strategist at Standard Chartered, said the data was not enough for the Fed to cut interest rates by 50 BP. Goldman Sachs believes that the speeches of Fed Governor Waller and New York Fed President Williams indicate that the Fed leadership believes that a 25 BP rate cut at the September meeting is the basic expectation, but if the labor market continues to deteriorate, they are open to a 50 BP rate cut at subsequent meetings.
Arthur Hayes, co-founder of BitMEX, wrote on X that the rate cut will not bring short-term benefits to Bitcoin because the reverse repurchase agreement (RRP) plays a regulatory role in this dynamic. The current RRP interest rate is 5.3%, higher than the 4.38% Treasury yield. Hayes believes that the interest rate differential will cause large money market funds to transfer capital from Treasury bonds to RRP, thereby reducing the amount of funds available for riskier investments such as cryptocurrencies.
Hayes also pointed out that market liquidity may be more restricted in the next two weeks before the rate cut actually comes. "Bitcoin will fluctuate around current levels in the best case, and slowly fall below $50,000 in the worst case as funds are withdrawn from Treasury bills and flowed back to the reverse repo program."
Analysts at Bitfinex said that due to the sluggish price trend for months, cryptocurrency investors had expected the Federal Reserve's September rate cut to drive the bull market, but escalating recession concerns may bring a deeper correction. "If the easing cycle coincides with a recession, Bitcoin may fall 15%-20% after the September rate cut. Assuming that the price of BTC is about $60,000 before the rate cut, the potential bottom will be between $40,000 and $50,000."
In response to the recent volatility in Bitcoin prices, cryptocurrency OG Shenyufa X said he was “prepared to endure another 16-19 months.”
Investor Ni Sen @Phyrex_Ni said on X that he was not in a hurry to discuss Shenyu’s remarks. “If there is really a last drop, it is likely to be during an economic recession... 16-19 months should be the average interest rate cut cycle of the Federal Reserve. After this cycle, if the economy is in recession, it will enter the stage of loosening the liquidity.”
Ni Sen believes that the fourth quarter of 2024 and the first quarter of 2025 may usher in a wave of opportunities for Bitcoin for four reasons:
Although the interest rate cut is not QE, the activity of funds in the market is expected to increase;
The general election, in which some presidential candidates openly support cryptocurrencies and make promises;
The BTC halving effect has not been proven to not happen;
The new version of FASB will take effect in December 2024, when cryptocurrencies will be able to adopt fair accounting standards and implement fair valuation in financial aspects.
It is worth noting that on April 19, 2024, Bitcoin will undergo its fourth halving. In the past, Bitcoin prices would often rise after halving, but this time the market was rather special. On the day of the halving, Bitcoin prices fell instead of rising, and the performance was not satisfactory, leading to market opinions that the Bitcoin halving effect may be ineffective.
Grayscale Research said that this Bitcoin halving is different from previous ones. The price increase occurred before the halving, which is related to changes in online activities such as ordinals and ETF fund flows.
