Professional Translator: Phyrex (often referred to as Nida) has released an article this morning stating that recent data does indicate that the market is trending towards a bear market. However, he still believes in the cryptocurrency market’s potential in the second half of the year. The following article will provide a summary and translation.
(Background: Learning from the “Bear Market Investment”: Identifying the Best Opportunities and Utilizing the Added Value of Bull Markets)
(Background: Crypto OG: This may be one of the most challenging bull markets most people have experienced.)
After a tiring day, I returned home at 3 am Beijing time. I was concerned that obtaining data late would lead to distorted information. However, after reviewing the data, I realized that I was overthinking. It was quite interesting. Today, when I went out for work, a friend told me that Binance’s server was down and asked why BTC’s hourly chart had gaps. After comparing, I found that the significant decrease in trading volume caused this, and not just on Binance. All exchanges experienced this situation. Currently, BTC’s trading volume on Binance is only 380 million US dollars, still ranking first. You can imagine the situation on other exchanges.
This has been the concept I have been conveying to my friends recently. The data has been leaning towards a bear market for the past two months. The reason for the continuous decrease in liquidity is the gradual decline in purchasing power in the cryptocurrency market. There are two reasons for the decrease in purchasing power. One is the lack of new positive news.
In the first half of this year, there were many positive news. Not only did spot ETFs emerge, but BTC also underwent halving. In March, there were three interest rate cuts, and the financial reports in April and May were strong. As for the second half of the year, the only potential positive news is the approval of ETH’s spot ETF, and it has been split into two parts. On a macro level, the dot plot for June changed from an expected three interest rate cuts to just one, leaving only the U.S. presidential election to look forward to. Therefore, when expectations decline, it will inevitably lead to a large amount of capital exiting the market, resulting in a decrease in purchasing power. In fact, we should consider that if there were no spot ETF approvals, BTC would still be around $30,000. In that case, the current liquidity corresponding to $30,000 would be considered normal.
Looking at BTC’s on-chain data, it is the same. Even at 3 am Beijing time, after 27 hours, BTC’s on-chain turnover is still the same as when BTC’s price was below $20,000 at the end of 2022. Interestingly, back then was when the market was speculating on when the Federal Reserve would enter the phase of pausing interest rate hikes. The announcement of the pause came at the end of 2022, and the market gradually strengthened at the beginning of 2023. So these two stages are very similar now.
However, the decrease in liquidity does not necessarily mean that prices will definitely fall. In fact, a significant portion of BTC’s drop to $16,000 is caused by Luna and FTX. The actual negative news will cause a massive panic sell-off. Therefore, even though the data has returned to the end of 2022, very few people are actually participating in the turnover. Most people are still speculating on BTC’s halving cycle, the Federal Reserve’s interest rate cuts, and the U.S. presidential election.
The decrease in liquidity also tells us that the support we currently see has not changed. In terms of price, the range of $64,000 to $69,000 is still the most critical support point. Unless there is continuous negative news, breaking through this support is not easy, especially for many friends who think it will drop below $60,000. However, the focus of this week is the core PCE on Friday. The market’s expectations are currently good. If it can be achieved, it may boost sentiment to some extent. If it cannot be achieved, it will be negative news.
Looking at the exchange’s inventory, it has only slightly decreased yesterday. The liquidity shortage today has even increased BTC’s inventory on the exchange. Currently, it is about 14,000 BTC away from the lowest level in six years. It has been a whole week and has not been digested yet. This is also the current pressure.
What are the expectations for the second half of the year? The data indeed indicates a bear market, and this has been the case for almost two months. However, a bear market in data does not mean a complete bear market in prices, especially for BTC and ETH. On the one hand, there is the support of spot ETFs (ETH is expected), which drives the inflow of funds. From BTC’s data, it can be seen that over 900,000 BTC have been bought so far. It is important to note that the current market liquidity is about 3.3 million BTC, accounting for over 27%.
In other words, if this 27% is still participating in the market turnover, then BTC’s price definitely should not be fluctuating around $64,000. As long as this portion of chips is not sold due to panic, the market will have 27% less selling pressure. It’s worth noting that these investors did not panic even when the price was around $56,000.
Additionally, long-term investors holding for more than six months have been increasing in the past three months. This indicates that as the price fluctuates around $65,000, more hodlers are holding on and not panicking. These investors are not related to ETFs, as ETFs have only been around for less than six months. Therefore, these investors are real cryptocurrency users, which is consistent with our recent turnover data.
What is even more important is expectations. Although there are many drawbacks in the second half of the year, there are also many positives. For example, the effect of the halving cycle is still anticipated, and the U.S. will enter the interest rate reduction phase at least this year. Next is the U.S. presidential election. It would be beneficial for the cryptocurrency market if the Republican Party takes office. At least in the current U.S. political landscape, the Republican Party is more friendly. Finally, there is the FASB at the end of the year, where listed companies can use the fair value of BTC and ETH in their financial reports. Therefore, I still maintain the view that there may be opportunities in the fourth quarter.
However, the fourth quarter will have a significantly higher impact, whether it explodes based on a foundation of $80,000, $70,000, $60,000, $50,000, or $40,000, who knows? The results will be completely different.
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