Like a war to achieve publicity, the fifth round of crypto asset bull market is gradually underway.

In April, we released a report titled “The Big Picture Is Over: Looking for Clues to the Start of a Bull Market”, emphasizing that the bear market has ended and the market has entered a period of recovery;

In July, we released a report titled "Short-Handed Whales' Aborted Rebound, On-Chain Data Supports Regaining of Upward Trend", pointing out that the box suppression does not change the nature of the recovery;

In September, we published the report "BTCQ4 may challenge the year's high of $32,000 again", accurately predicting 10's counterattack in the bleak market;

In October, we released the report "As expected, BTC will most likely continue to fluctuate upward along the channel in the future", which clearly stated that stablecoins are entering a bull market, and after countermeasures, the market will continue to rise;

In November, we released a report titled "Internal and external responses: the fifth bull market in crypto assets is about to emerge", pointing out that the market has begun to transform from a repair period to an upward period (bull market).

Whether in April when spring breaks out or in August and September when the autumn wind is bleak, EMC Labs is firmly bullish on the market and predicts that BTC will break through the high point of the year in the difficult time of September.

Finally, the market broke out of the shadow of interest rate hikes, got rid of the fear of another collapse, and headed for the starry sea of ​​the fifth crypto asset bull market!

This is the inspiration of industrial thinking and the victory of will.

The year 2024 will be a magnificent year, a year for the expansion of blockchain technology applications, a year for crypto assets to enter a bigger stage, and a year for builders to reap the rewards of their hard work.

As the new year begins, I wish you all to have lofty ambitions and follow nature.

Macro Market

In December, the Federal Reserve ended its interest rate hike as planned. This round of interest rate hikes started in April 2022 and ended in October 2023, lasting 19 months and with a rate hike of 5.25%.

US benchmark interest rate

At the end of 2023, all major global financial markets except China recorded gains. The Nasdaq, which is often used for comparison of the crypto market, continued to rise by 5.52% in December to close at 15011.35, recording a 43.42% increase for the whole year.

It shows that after experiencing deflation and fear in 2022, global capital actively went long in 2023 in anticipation of the end of deflation in preparation for the expected return to the interest rate cut cycle in 2024.

During the same period, gold prices continued to rise, closing at US$2,062.94, indicating that some capital that lacked confidence in economic recovery chose safe-haven assets amid expectations of interest rate cuts and rising stock markets.

Correspondingly, the U.S. dollar index consolidated throughout the year, and began to accelerate its downward trend after the interest rate hikes in November and December stopped and the interest rate cut expectations were initiated. It is expected to continue to decline in the future.

US Dollar Index

Compared with the global financial market, BTC achieved a substantial increase of 155.82% throughout the year, recovering 87% of the decline in 2022, showing great elasticity and resilience.

BTC price monthly trend

Judging from Emergence Engine, BTC will soon move out of the repair period and enter the rising period (that is, the bull market stage).

Crypto Market

For BTC, December was a month of steady upward movement and annual breakthrough. It opened at $37,732 and closed at $42,288, up $4,556 for the month, or 12.07%, with an amplitude of 19.56%, achieving a four-month consecutive increase.

A new round of rise started in mid-October, pulling BTC back to the rising channel of the repair period (the green part in the figure below), and tested the middle track of the rising channel. It broke through the middle track in November and broke through the upper edge of the rising channel in December.

BTC price daily trend

From the perspective of the box, the 25,000-32,000 box (the purple part in the above figure) was effectively broken in November. This box suppressed the BTC price for 8 months in 2023, and it was also the main range for washing during the repair period. In this range, millions of chips changed hands.

Currently, the BTC price has entered the 32,000~48,000 box space. A breakthrough in this box will mean the opening of the bull market and the establishment of an upward channel.

Funding

Stablecoins provide a channel to monitor the overall inflow and outflow of funds in the market.

In 2023, the outflow of stablecoins reached 9 billion US dollars, of which USDT had 11 net inflow months in 12 months, with an overall inflow of 25.4 billion US dollars, and USDC had an outflow of 19.9 billion US dollars throughout the year, with only 200 million US dollars inflow in December, and net outflows in the remaining 11 months. The remaining outflow gap mainly comes from BUSD, which is about to stop circulating.

Statistics of inflow and outflow of major stablecoins

The turning point of stablecoin inflow occurred in October. The large inflow of USDT in that month directly prompted BTC to break away from the box suppression and return to the rising channel of the repair period. After that, with the continuous inflow in November and December, BTC finally broke through the upper edge of the rising channel of the repair period, showing a trend of breaking the trend of the repair period.

Throughout the year, USDT was the main channel for capital inflow, reaching 254 throughout the year, with strong sustainability, and the inflow speed accelerated in Q4, especially in November. Based on this, it can be inferred that the Asian community, which mainly uses USDT, is the promoter and beneficiary. Of course, the US community and institutions have adopted USD on a large scale. This part of funds is currently difficult to count.

Stablecoins provide a channel to monitor the overall inflow and outflow of funds in the market.

With the rapid rise in BTC prices in early December, the market-wide profit ratio rose from 1.79 at the end of November to 1.92, among which the long-term investors (long-term investors) rose from 1.8 to 2.0, and the short-term investors fell from 1.2 to 1.18.

These figures show typical characteristics of the recovery period: long-term investors continue to accumulate floating profits, while short-term investors are keen to cash in profits. The constantly revised floating profits of short-term investors actually clear the market of the impetus for a sharp short-term decline. EMC Labs believes that: from the perspective of position structure and profit pressure, although the BTC price has experienced a sharp rise, there is not much downward momentum in the market.

Check out the BTC cost distribution again——

BTC cost distribution

Compared with November, the market's biggest defense line has risen to $34,000, and above $41,000 to $44,000, 1.05 million chips have been accumulated. EMC Labs believes that there is only one real threatening pressure point ahead, which is the turning point between the repair period and the rising period, $48,000. Once it crosses $48,000, it will be the magnificent fifth round of crypto asset bull market.

Long-Short Game

We believe that market cycles are formed by changes in the trading behaviors of long-term investors (long hands) and short-term investors (short hands). After analyzing the data, EMC Labs found that the long and short hand positions are undergoing historic changes in December——

Long-term, short-term, miner, CEX BTC position changes (monthly)

From January to November, long hands were accumulating, while short hands were continuously selling. In these 11 months, long hands collected 800,000 BTC, while short hands reduced their holdings by 560,000, 20,000 were outflowed from CEX, and miners increased their holdings by 10,000.

This is a typical feature of the repair period - from short to long, forcing short-term investors to surrender their chips through price fluctuations, draining liquidity and thus pushing the increasingly dry market out of the repair period and into a bull market.

In December, a historic turning point occurred - long-term investors reduced their holdings by 50,000 coins, while short-term investors increased their holdings by 100,000 coins. Although the "short-term shift" also occurred in March, the scale in December increased significantly, which may mean a trend change in the behavior of market participants. EMC Labs believes that the "short-term shift" is a signal that the market is switching from the "repair period" to the "rising period". Once the market enters the rising period, the long-term investors will enter a new round of historic sell-offs.

On-chain data

The behavior of the coin holders behind the on-chain data is both the basic support for the BTC bull market and an important representation of the bull market.

In 2023, the rise of the Ordinals protocol brought a wave of irrational trading craze to the long-dormant Bitcoin ecosystem.

This craze, which mainly stirred China, reached its climax twice in May and December respectively with the intervention of OKX and Binance, two centralized exchanges with huge influence among the Chinese trader community.

The irrational competition for block space by Ordinals (mainly BRC20-type MEME tokens) has caused the on-chain data of the Bitcoin network to become chaotic.

Daily Fees Income of Bitcoin Network

Judging from the income of Bitcoin network miners, the income in December is much higher than the previous repair period.

May 8 and December 16 became the third and fourth highest revenue days in Bitcoin’s history. The first and second highest revenue days occurred during the ICO craze in 2017.

This surge in miners’ consumption income is not sustainable and has disrupted the normal operation of the Bitcoin network for payment and value transfer. This is reflected in the daily new entities and daily active entities data.

Daily active entities on the BitNetwork

During the BRC20 MEME craze in December, irrational traders continued to engrave Ordinals, which pushed up the cost of using the Bitcoin network and inhibited the generation and activity of new users (entities).

This is also the reason why the Bitcoin Core team stood up and criticized Ordinals participants for consuming the BTC brand and abusing network space, and proposed to develop a new version of the client to expel the Ordinals group from abusing block space.

According to historical data, the transition from the repair period to the rising period is inevitably accompanied by the growth of users of the Bitcoin network and the prosperity of on-chain behavior. Due to the craze for Ordinals BRC20 MEME coins, data has been polluted, user behavior has been affected, and our observation has become more difficult.

In 2023, the overall on-chain data is improving, but there was indeed a huge retracement in December, which made BTC's rise this month seem insufficient. In the future, we will continue to pay attention to the evolution of on-chain behavior through data, which is the basis for the launch of the bull market. The decline in data in this dimension is unbearable for the market.

BTC ETF

As a new type of digital asset, BTC has gradually gained attention and involvement from mainstream financial institutions around the world, especially in the United States, since the last bull market.

Since the approval of BTC futures ETF in 2017, applications for BTC spot ETF have been gradually gaining momentum. Because the participation cost and scale of spot ETFs are better than those of futures ETFs, the application and approval of BTC ETFs have received in-depth attention from the crypto asset market. Whether it is approved or not, every move will have a direct impact on the price of BTC.

Current applicants include traditional asset management giants such as BlackRock and FTSE, as well as new Crypto investment management institutions such as Valkyrie Investments. The market generally believes that in the next few years, these approved BTC ETFs will bring tens of billions of dollars of capital inflows to the market.

The upcoming approval of these BTC ETFs (the latest expected date is mid-January) is also one of the driving forces behind the recent rise in BTC prices.

EMC Labs believes that the gradual development of the current BTC or the entire Crypto bull market is a high-probability event driven by industrial and cyclical changes, rather than the expectation of BTC ETF. In 2023, the application and approval expectations of BTC ETF attracted a certain amount of speculative funds to enter the market, and the current BTC price has also reflected this. In January, whether the approval of BTC ETF is passed or not, it will cause drastic fluctuations in BTC prices. The reasons may be the departure of old speculators, the entry of new speculators, or the manipulation of contract manipulators. EMC Labs believes that the transition from the repair period to the rising period is already happening, and the inflow and outflow of speculative funds caused by the approval or failure of BTC ETF may prolong this transition process, but it cannot change the trend of the gradual start of the bull market.

Conclusion

Stablecoins have seen net inflows for three consecutive months, and the coin holding structure has begun to “change from long to short.” BTC has broken away from the rising channel during the repair period and is trying to establish a new rising channel.

All these signs indicate that the development of the bull market has been written into the script. The transition is only a matter of time and will be completed as early as January and no later than June.

In January, whether the BTC ETF is approved or not, it will cause severe fluctuations in the BTC price.

If you believe in long-termism like us, then you can give up your worries and wait calmly for the arrival of the fifth round of crypto asset bull market!

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