June 12, Beijing time, is called "Super Wednesday" by the financial market because two "blockbuster" will be released tonight and tomorrow morning: the latest CPI data and the Federal Reserve's interest rate decision. The relevant data may become the weather vane of the next wave of trends in the crypto market.
Crypto market volatility intensifies, Bitcoin and altcoins fall together, triggering $250 million in liquidations
Cryptocurrency markets have experienced significant volatility ahead of Super Wednesday amid heightened uncertainty about future market movements. Although Bitcoin opened near $70,000 yesterday, it failed to hold this resistance and fell to the $66,000 range, even hitting $66,170 on Tuesday night, its lowest point in nearly three weeks.
Although Bitcoin has rebounded to around $6,700 at the time of writing, its 24-hour loss still stands at 1.1%, according to data from Coingecko. In contrast, the correction of altcoins was more significant, with cryptocurrency prices in the Coindesk 20 index generally falling, with an overall decline of more than 6%. Among them, Ethereum fell below $3,500, a drop of 6.5%; Solana (SOL), Dogecoin (DOGE), Cardano (ADA) and Chainlink (LINK) fell between 6% and 9%.
Obviously, the sudden pullback in the cryptocurrency market caught investors off guard. When traders are unable to meet margin requirements or do not have sufficient funds to maintain their positions, they will suffer partial or full loss of initial funds or margin, which will trigger exchanges to close leveraged positions and liquidate. According to Coinglass data, more than $250 million of leveraged derivative trading positions of crypto assets across the network were liquidated this morning, mainly long orders. This is the second large-scale leverage surge this week, following the liquidation of $400 million last Friday. At present, the amount of liquidation in the crypto market has narrowed slightly to $219 million.
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The cryptocurrency industry does not seem to be too pessimistic about the current macroeconomic situation. Overall, despite the market being a little chaotic, some fundamental indicators are still performing well, including:
In terms of on-chain data, Ethereum’s user base is still expanding, and both the number of active addresses and the number of new addresses have reached relatively high levels in history. This may indicate the long-term health and growth potential of the network.
In terms of on-site funds, the holdings of stablecoins as safe-haven assets on exchanges have dropped significantly. This may mean that market confidence has recovered and investors may reinvest funds in riskier assets instead of staying on the sidelines.
On the macroeconomic front, the Personal Consumption Expenditures (PCE) index released on May 31 was 2.8%, similar to the Consumer Price Index (CPI). It is expected that the market has already digested this data and is unlikely to change the Fed's current wait-and-see attitude. As long as a rate cut is not imminent, the market has enough motivation to rise. It is expected that the market will maintain its expectations for high interest rates until inflation data improves.
In addition, some institutional investors remain optimistic about the future of the crypto market, believing that it may still maintain an upward trend.
QCP Capital, a Singapore-based crypto investment firm, believes that despite the short-term market pressure and risk aversion, it is still a good opportunity to accumulate cryptocurrencies. Positive events include the launch of the spot Ethereum ETF and the verbal battle between Biden and Trump to win over crypto voters. The recent decline in the cryptocurrency market is mainly caused by the following factors:
1. U.S. non-farm payrolls data exceeded expectations, U.S. Treasury yields rose, and expectations of rate cuts in July and September were ruled out;
2. French President Emmanuel Macron called for a surprise election, and the euro fell sharply against the dollar, pushing the dollar stronger and triggering risk aversion;
3. The market remains cautious ahead of the Consumer Price Index (CPI) and the Federal Open Market Committee (FOMC) meeting;
4. Bitcoin ETF saw outflows of $64 million on Monday, possibly as traders reduced risk ahead of important events.
According to K33 Research in its market analysis report on Tuesday, Bitcoin may experience frequent fluctuations in the near future. The crypto market is "highly sensitive" to recent economic data and "highly correlated" with U.S. stocks. Their research data shows that offshore traders who have been bullish in the past two weeks are currently losing money on their Bitcoin positions, which poses a potential risk of long squeeze to the market.
Meanwhile, U.S. spot Bitcoin ETFs ended their 19-day record of net inflows, and Bitcoin's correlation with the U.S. stock market reached its highest level in 18 months. Last week, Bitcoin's 30-day correlation coefficient with the Nasdaq grew to 0.64 for the first time since 2022.
Is the crypto market in the "preparation stage" for the next bull market?
At present, the cryptocurrency market's expectations for the future are mainly affected by changes in monetary policy. The market seems to be in the preparation stage for the next bull market. Zhou Lele, deputy chief operating officer of Shengli Securities, said that as prices rise, the inflow of over-the-counter capital (ETF) and the stable holding strategy on the market may be resonating, which will become a key factor in the rise of Bitcoin prices and the recovery of volatility. The core concerns of the future market include:
Differences in when the Federal Reserve will begin cutting interest rates and market expectations for earlier rate cuts.
After the approval of Ethereum ETF, there was a revival of old DeFi projects, and the difference in market expectations of being overly pessimistic about Ethereum ETF.
The expected divergence between the changing sentiment around Bitcoin ETF inflows and the underlying fundamentals of the virtual asset market.
The expected difference between macroeconomic trends and the actual market reaction.
Overall, the pullback in the cryptocurrency market this week did not affect the overall positive trend of the market. Some market observers pointed out that some positive signs during the sell-off may indicate a rapid economic recovery. In fact, Federal Reserve Chairman Powell revealed at the Stanford Business School Forum two months ago that most FOMC members believed that it would be appropriate to lower the policy interest rate at some point this year.
But to make that decision, the Federal Reserve still needs greater confidence that inflation is falling sustainably to its 2% target. There are risks in cutting rates too early or too late, and it is too early to tell whether recent inflation data is just a temporary blip.
On the other hand, as other countries around the world continue to cut interest rates, it will be difficult for the United States to ignore this. Bitcoin seems to be digesting the impact of the Federal Reserve's rate cuts step by step. Anonymous cryptocurrency analyst Gumshoe posted on the X platform that Bitcoin had pulled back several times before this year's FOMC meeting, but soon reversed its trend afterwards.
Before the Fed releases the data, the market is likely to be trendless, that is, it is mainly volatile. Buy when it falls too much, sell when it rises too much, and don't chase the rise and sell when it falls! In general, the ETF hype of Ethereum will definitely come again. At present, many Ethereum series products are at a low level. This is a good opportunity to ambush and increase positions. Buy when it falls and sell when it rises! The real violent bull market in the crypto market is in the third quarter, so everyone should have confidence and never give up. Whether it is a short-term adjustment or a decline, it is all for the big bull market. Hold the spot and hold it firmly, especially high-quality assets. At present, the market should pay attention to the position near 67,000. If the 4-hour level receives below 67,000, then short-term adjustments are inevitable, and the market needs continuous baptism. What everyone can do now is to study and learn more, and at the same time, the more it falls, the more you should buy high-quality assets. There are several macro data this week, especially the CPI+interest rate decision+monetary minutes tonight. If the data tonight is positive and supports the rebound, there will be opportunities in the short term, but the premise is that it must reach a new high. The rebound cannot reach a new high, and there will be a subsequent correction.
1. Tonight at 20:30, the CPI data will be released. The core CPI annual rate in the last quarter of May, the previous value is 3.6%, and the expected value is 3.5%. Data higher than expected is a negative correction, and data lower than expected is a positive rebound. It has been negative for four consecutive times and neutral once. Let's see if tonight's data will be positive. 2. At 2:00 a.m. tonight, the Federal Reserve will announce the interest rate decision and economic forecast summary (FOMC meeting). 3. Around 2:30 a.m. tonight, Federal Reserve Chairman Powell will deliver a speech. Tonight's CPI data is still relatively important. Judging from the current trend, there is a high probability that it will be an opportunity to bottom out and rebound. After all, we must always believe that the bull market is still there and the bull market is far from over! Therefore, temporary market weakness does not affect the long-term trend. We must ride the trend and follow the trend! The deeper the decline, the deeper the squat, and the stronger the explosive power. Let's wait patiently for the arrival of the trend! The main reason for the decline of Ethereum is the non-agricultural data report, coupled with the fact that a giant whale suddenly began to sell more than $56 million worth of Ethereum and other reasons. This round of callback actually has a very limited impact on Bitcoin, and it mainly affects altcoins. In fact, many altcoins have already fallen to the bottom of the decline, and they can't fall any further. At this time, don't always ask if you can hold them. As long as there are valuable altcoins, you can hold them and hold them until the bull market! Especially for those altcoins that have never exploded from the beginning to the end, we must hold them firmly, because things will change!
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