BTC price fluctuates downward, what will be the future trend of the Web3 market?
经历了"五月穷"和"六月绝"的低迷后，七月的加密市场并未迎来预期中的反弹。相反，德国政府的抛售与Mt.Gox偿还等负面消息加剧了投资者的恐慌情绪，导致比特币价格下探，带动整个加密市场全面下跌。尽管市场遭遇重创，但高达160亿美元的FTX还款计划、降息预期升温以及美国大选结果等多重利好因素叠加，许多人认为加密市场或将在2024年第四季度开始出现转机。
Current Important Negative Factors
Mt. Gox Compensation Triggers Market Panic: Bitcoin Price Plummets
The compensation issue related to the Mt. Gox incident has attracted significant market attention, with a sell-off pressure of up to 142,000 BTC and 143,000 BCH, which triggered market panic on June 24, causing BTC prices to drop to around $60,000.
With the official launch of Mt. Gox's compensation on July 5, BTC fell below the $60,000 support level under heavy selling pressure. During this process, BTC miners showed signs of capitulation. Historical experience indicates that this usually means the price has hit the bottom. The last comparable drop in hash rate occurred in 2022 when Bitcoin's trading price was $17,000.
Andrew Kang, co-founder and partner of Mechanism Capital, believes that most market participants are unaware of the severity of the potential drop in Bitcoin's four-month volatility range. The closest similar situation we can find is the range in May 2021, when Bitcoin and altcoins also experienced a parabolic rise. Currently, cryptocurrency leverage is close to historical highs (excluding CME), but in this case, our range time is longer (18 weeks compared to 13 weeks), and extreme liquidation has not yet occurred. During the bull market from 2020 to 2021, we experienced several similar situations.
The initially estimated low point of $50,000 may be too conservative, and we might see a more extreme correction to the $40,000 range. Such a correction could cause significant damage to the market and may require several months of consolidation/downward trends (recovery period) before a potential upward trend reversal.
German Government Sell-off: Clearing Nearly Half
In the morning session, the German government transferred over 10,000 Bitcoins in batches to cryptocurrency exchanges and market makers. This action caused Bitcoin prices to briefly fall below $55,000. However, according to Arkham Intelligence, by the close of the U.S. stock market (around 01:56 AM Beijing time on Tuesday), the German government address had recovered 2,898 Bitcoins, worth approximately $163 million, mainly from Coinbase, Kraken, and Bitstamp.
According to Arkham's data, the German government's sell-off plan has been nearly half completed. Since it began selling last month, its Bitcoin holdings have decreased from nearly 50,000 to 27,461, with the current holdings valued at approximately $1.5 billion.
Recent industry headlines have focused on the German government's sell-off and Mt. Gox refunds. Many analysts believe this is the main reason for the recent sharp decline in Bitcoin. However, analysts from Bitfinex attribute the drop to normal seasonal weakness.
Despite the market decline, data released by CoinShares indicates that inflows into digital asset investment products reached $441 million last week. Among them, Bitcoin investment products accounted for the largest share of total inflows into crypto products ($398 million), making up as much as 90%. Regionally, the inflow of funds mainly came from the United States, amounting to $384 million. Other significant buying came from Hong Kong ($32 million), Switzerland ($24 million), and Canada ($12 million), while Germany saw an outflow of $23 million.
Bitcoin Mining Market is Bottoming Out
Recently, Bitcoin prices dropped to $54,000 (now recovered to $57,000), making survival even more difficult for miners who have already seen profits plummet due to the halving. According to surveys, if Bitcoin prices fall to $54,000, only ASIC miners with efficiency above 23W/T can remain profitable, with only a few models barely able to sustain.
Miner sell-offs are also considered part of the reason for this price drop. To address cash flow issues post-halving, mining companies continue to sell, with 30,000 Bitcoins from miners entering the market in June alone.
Data from F2Pool indicates that, based on an estimated energy cost of $0.07 per kilowatt-hour, when Bitcoin prices are at $54,000, only ASIC miners with a power consumption of 26 W/T or lower can achieve profitability. Specifically, models such as Antminer S21 Hydro, Antminer S21, and Avalon A1466I break even at prices of $39,581, $43,292, and $48,240, respectively. Other models like Antminer S19 XP Hydro, Antminer S19 XP, and Whatsminer M56S++ need Bitcoin prices to exceed $51,456, $53,187, and $54,424 to be profitable.
In this context, as the tide of inscriptions recedes, mining companies naturally choose to sell Bitcoin to survive, whether for cash flow reserves or industry migration and exit.
Fortunately, as Bitcoin prices decline, small and medium-sized mining operations are gradually shutting down, leading to a rapid decrease in Bitcoin mining difficulty, and miner capitulation is about to end. On July 9, BTC.com data showed that Bitcoin mining difficulty was reduced by 5% to 79.5T, with the average hash rate across the network over the past week at 586.72EH/s. Since May, the amount of Bitcoin sent to exchanges for sale by miners has significantly decreased, and over-the-counter trading volume has noticeably declined. By June 29, the total trading volume at mining company OTC desks had been exhausted, indicating that selling pressure has eased.
Overall, Bitcoin price fluctuations have had a huge impact on miner survival, but as the market adjusts, miner sell-offs are gradually decreasing, and the industry may welcome a new balance.
Positive Factors Worth Noting
FTX Repayment Plan Expected to Drive Market to New Highs
According to the revised restructuring plan and disclosure statement submitted by FTX to the U.S. Bankruptcy Court in Delaware this May, it is estimated that the total value of assets collected and converted to cash available for distribution will be between $14.5 billion and $16.3 billion, exceeding the $11 billion owed to FTX's customers and other non-government creditors. The excess cash will be used to pay interest to the company's over 2 million customers.
Currently, FTX has received court approval for creditors to vote on the compensation plan for cryptocurrency in cash or in-kind. Creditors must vote by August 16, and Judge Dorsey will decide whether to approve the plan on October 7. Once approved, FTX will repay creditors within two months, expected between the fourth quarter of 2024 and the first quarter of 2025.
Although the final compensation method has yet to be determined, crypto analyst Ash Crypto believes that since most FTX customers are cryptocurrency enthusiasts, this fund of up to $16 billion will enter the crypto market and become a major catalyst for price increases. Bitcoin is expected to break $120,000, Ethereum will surpass $12,000, and other altcoins will rise by 10 to 50 times.
Clear Expectations for Interest Rate Cuts
The Federal Reserve's decisions on interest rate hikes and cuts are one of the important factors affecting Bitcoin prices, with rate cuts typically boosting the market.
Recently, Federal Reserve Chairman Powell stated that inflationary pressures in the U.S. have eased, but the Fed needs more data to prove that inflation risks have passed before deciding to cut rates. If rates are cut too early, inflation may rise again; if cut too late, it could lead to slowed economic growth or even trigger a recession.
Although Powell indicated that the timing of rate cuts is not yet determined, market expectations for rate cuts have warmed as the latest U.S. economic data shows signs of slowing growth, such as a significant downward revision of June's non-farm payroll data and an unemployment rate rising to 4.1%, the highest since November 2021. According to the CME's FedWatch Tool, as of July 9, the market expects a 73.6% probability of the Fed cutting rates at the September meeting, with a 22.9% probability of holding steady.
Crypto Accounting Standards Set to Take Effect
Last December, the Financial Accounting Standards Board (FASB) in the U.S. released its first version of accounting rules for cryptocurrencies, requiring companies holding Bitcoin or Ethereum to record changes in their value at fair value and reflect them in net income. The new rules will take effect for fiscal years beginning after December 15, 2024, applicable to both public and private companies in 2025.
For crypto assets, this change in accounting standards means that companies like MicroStrategy, Tesla, and Block will be able to record the highs and lows of their cryptocurrency holdings. This will promote further compliance in the crypto market and attract liquidity from mainstream financial markets. Historical price trends of Bitcoin post-halving
Market trends can be categorized into three types: upward, downward, and sideways. Regardless of how future market conditions change, they ultimately fall into these three patterns. Attempting to predict the market's direction is a foolish endeavor; we only need to know how to respond if the market moves in a certain direction.
If the market breaks through the current resistance level and stabilizes above 69,000 points, it can be seen as the beginning of an upward trend.
Two Possible Scenarios for an Uptrend:
Hitting Previous Highs but Not Breaking Through: The market may approach previous highs but fail to break through, or only slightly break through and then retreat. In this case, do not be misled by market illusions; do not chase highs. You may not even need to exit; just reduce your position, especially if you feel over-leveraged.
Breaking Previous Highs and Sustaining New Highs: If the market breaks previous highs and sustains new highs for at least three days, pay attention to the strength of the breakout and observe whether there is a strong rally within three days to a week, or if it is a sideways move upward. If the trend is strong and rises quickly after the breakout, you can hold your position and wait for a significant correction (at least around 10%) before adding to your position. If the trend is weak and the increase is slow, it is advisable to reduce your position at new highs to prevent a false breakout. Currently, the likelihood of continued upward movement appears low. If the second scenario occurs and the trend is not strong after the breakout, be wary of the risk of a significant decline. Historical references for market conditions before and after previous halvings:
Second Halving (July 10, 2016)
Before this halving, Bitcoin surged 78% within a month, and after the halving news was released, it experienced a deep pullback, dropping 30% within a week, with the maximum drop even reaching 40%. It then began a steady rise from under $500 to nearly $20,000. After the halving, the price corrected by 30%.
Third Halving (May 12, 2020)
In 2020, due to the historically rare black swan event of March 12, the market fell sharply before the halving. Excluding this negative factor, Bitcoin also experienced a 20% correction in the week leading up to the halving. There was a rebound post-halving, but it did not rise significantly, and the market spent time in consolidation. From the pre-halving high in early May, it oscillated until breaking upward at the end of July, oscillating for three full months, during which there were also two corrections of over 10%.
From the previous two halvings, it can be seen that Bitcoin tends to undergo corrective trends before and after halvings. Currently, the market generally expects Bitcoin to rise after the halving, but what will happen this time? Further observation may be needed.
