The cryptocurrency market is dumping goods during the "6.18" sales event. How will the market trend in the future?

Written by: Tuo Luo Finance

The crypto community has its own 618.

After a week of decline, on June 18, the market experienced another shock. In the early hours, Bitcoin rarely fell below the market support price of $65,000, and Ethereum followed suit, dropping below $3,400, with a 24-hour decline of 6.23%. The king of MEME, SOL, also struggled, once falling to 127.22 USDT, down 10.98%.

Mainstream coins are bleak, and altcoins are even worse, generally showing a "numb decline" trend, with most altcoins dropping over 20%. The newly launched ZK once fell below 0.2 USDT, with a decline exceeding 36%. According to Coinglass data, as of 2 PM yesterday, the total liquidation across the network reached $318 million within 24 hours, primarily affecting long positions, with over $270 million in long liquidations. As a result, the crypto market cap shrank again, dropping to a low of $2.46 trillion.

Although Bitcoin has recovered to above $65,000 today, the market's pessimistic sentiment is evident in the face of such conditions. Just a few months ago, the general consensus was that Bitcoin would definitely reach $100,000 by the end of the year, with euphoric predictions of a raging bull market. This raises the question, what exactly happened?

The retrospective analysis of the results inevitably leads to the issue of causation, but when discussing this Bitcoin decline, it ultimately boils down to insufficient liquidity.

The core factor driving Bitcoin's rise was undoubtedly the Bitcoin spot ETF. The rapid influx of institutional funds led to a surge in Bitcoin demand, propelling it from $40,000 to $73,000, ultimately providing crucial support for Bitcoin consensus. However, this consensus has recently faced backlash; from June 10 to June 17, Bitcoin ETFs generally showed a net outflow, with outflows reaching $810 million in the past week, and institutional buying momentum gradually waning.

The turnover rate also reflects this trend, with BTC's on-chain turnover rate continuously decreasing, standing at only 3.91% in 24 hours. The balance of BTC on exchanges is also steadily declining, nearing historical lows; as of June 19, the BTC balance in exchange wallets was 2.4765 million coins, reflecting poor selling sentiment.

Behind the data performance is a weakening of macro expectations. At the monetary policy meeting on June 12, the Federal Reserve maintained the target range for the federal funds rate at 5.25% to 5.5%, in line with market expectations. The released dot plot indicated that Fed officials predict the median federal funds rate will drop to 5.1% by the end of 2024, suggesting only one rate cut this year, fewer than the previously predicted two. Following this announcement, risk markets were significantly affected, with the crypto market bearing the brunt, resulting in over $600 million in digital asset investment products exiting.

On the other hand, the so-called "miner surrender" is also impacting Bitcoin's price trend. After the halving, due to the continuously rising mining costs, miners are facing cash flow crises to ensure operations and expansion. Recent indicators show significant transfers from mining pools, a surge in OTC trading volume, and notable sell-offs by large listed mining companies. On June 11 alone, Marathon Digital, the world's largest Bitcoin mining company, sold 1,200 Bitcoins, marking the largest daily sell-off by miners since the end of March. In June, miners' OTC trading desk balances exceeded 54,000 BTC, reaching a one-year high.

Despite the frequent bad news, data shows that the $65,000-$69,000 range remains the largest entry point for BTC investors, where Bitcoin is more likely to exhibit reluctance to sell, thus gaining value support. This is also related to changes in holding patterns; with the entry of high-net-worth holders, short-term gains are less likely to be the main factor influencing sales. Therefore, this concentrated and somewhat dull market fluctuation is likely to continue.

Bitcoin price range investor distribution, source: X platform

Bitcoin has institutional support, but other coins are not so fortunate. In traditional bull market transmission, the common path is from high-stability assets gradually sinking to lower-stability assets, activating high-yield preferences from low-yield sources, i.e., mainstream coins - altcoins - MEME coins - other sectors, but this year, this path is not as effective as before.

A significant characteristic of this bull market is the siphoning effect of liquidity; large amounts of liquidity have entered the Bitcoin ecosystem, but new institutional money has not spilled over into other areas. The public chain ecosystem lacks strong applications, and value coins are underperforming, while MEME coins are gaining traction.

Token category growth performance this year, source: Binance

The much-discussed VC tokens have exacerbated this situation, as the linear unlocking of VC tokens has led to a surge in selling pressure. After the unlocking period, a large number of tokens went unsold, making retail investors the victims of liquidity, and token prices further declined. According to a report from Token Unlocks, approximately $155 billion worth of tokens are expected to be unlocked from 2024 to 2030, meaning the market needs to increase liquidity by at least $80 billion to absorb this. In the past week, projects like Aptos, Immutable X, Strike, Sei Network, Arbitrum, and ApeCoin have sold tokens worth $483 million due to large unlocks.

With no innovation in applications, mismatched supply and demand, and limited liquidity, the performance of altcoins has been extremely poor since March this year. In terms of fair launches and profit effects, they are not as aggressive as MEME coins, while their value is not as strong as mainstream coins, making them a dilemma for investors. Previously, Shen Yu had mentioned that this bull market might not see an altcoin rally. Following the liquidation effect of CRV last week, altcoins unexpectedly faced another bloodbath.

In reality, the market consensus for a bull market has lasted for over half a year, but the visible profit effect is diminishing. Apart from a few lucky retail investors who hit the jackpot with MEME, airdrops, or altcoin contracts, or those who have held Bitcoin with diamond hands, the wealth distribution in the market still favors top exchanges, CeFi, DeFi, and previous project parties that financed and issued tokens, exacerbating the weak profit effect and the divergence in value.

Against this backdrop, how to break the deadlock has become a key topic of market discussion. From the current situation, the market's rise is entirely driven by information, and the most direct improvement may come from the entry of macro liquidity, which is why everyone is so focused on the Fed's interest rate cuts. In fact, after the European Central Bank announced a rate cut, crypto experienced a slight increase, showing significant stimulus, but whether liquidity can reach other sectors beyond mainstream coins remains uncertain.

From a macro industry perspective, another potential positive factor comes from the U.S. elections. As the elections approach, the crypto battle between Trump and Biden is intensifying. Following Trump's acceptance of cryptocurrency donations and the popularity of NFTs, he has made frequent moves, openly supporting the Bitcoin miners' conference, posting on social media, "I hope all remaining Bitcoins are made in America," and claiming he wants to be an advocate for Bitcoin miners in the White House, stating that miners can help stabilize the energy supply of the power grid. Biden has also changed his previously cautious stance and will participate in the Bitcoin roundtable for the first time in early July.

The positions of both sides have turned cryptocurrencies into political bargaining chips, leading to a new era of crypto regulation. The Ethereum ETF is a typical example, completing a historic reversal despite being unlikely to pass. Recently, Consensys announced on social media that the SEC has concluded its investigation into Ethereum 2.0, confirming that ETH is not subject to securities trading allegations, bringing a long-awaited rise to the Ethereum ecosystem. According to Bloomberg analysts, the Ethereum spot ETF is expected to launch before July 2, and compared to Bitcoin's siphoning effect, the growth of the Ethereum ETF is more likely to directly stimulate the ecological market, which will be the most foreseeable positive factor in the near future.

However, analysts and institutions have differing opinions on the future price and market trends.

Unlike the previously recognized bullish sentiment, some analysts believe that the decline will continue after 618. According to well-known cryptocurrency analyst Rekt Capital, the BTC price cluster is forming near the high point of $71,600, indicating more potential downward movement, and a pullback below $64,000 may be needed for a healthy reset. Trader Titan of Crypto even believes that based on the technical patterns on the monthly chart, Bitcoin may break below the $60,000 mark on July 1. On the X platform, on-chain analyst Ali also stated that historically, Bitcoin generally performs poorly in the third quarter, with an average return of only 6.49% and a median return of -2.57%.

Bitcoin monthly chart, source: Titan of Crypto

Overall, the prevailing view among institutions is short-term bearish and long-term bullish. QCP Capital, Bitfinex, and 10x all emphasize that BTC will continue to rise, highlighting the consensus of $80,000 to $120,000 by the end of the year. Whales seem to share the same view; Lin Chen, the head of Deribit's Asia-Pacific business, revealed on social media that a whale sold $70,000 call options for the end of July and entered into $70,000 call options for the end of the year, totaling 100 BTC, paying $883,000, indicating a relatively negative short-term attitude towards price signals.

For altcoins, the controversy is even more pronounced. Quinn Thompson, founder of the crypto hedge fund Lekker Capital, believes that given the current high leverage and open contracts, lack of panic buying, and stagnation of stablecoin supply, the best strategy is not to buy altcoins.

However, Andrei Grachev, co-founder of DWF Labs, believes that as long as Bitcoin remains stable, altcoin rallies will occur in the coming months. BitMEX founder Arthur Hayes even stated on June 7 that it is the best time to buy altcoins, and recently mentioned that the Dogecoin ETF will pass by the end of this cycle, emphasizing on social media that he is increasing his holdings in PENDLE and DOGE.

Regardless, the current market indeed shows a rather dull trend; the more this trend persists, the more cautious investors should be. After all, whether it’s the project parties or major exchanges, they are often the most eager during such times, and being eager to spend money is not a wise move for any user.