Five Major Factors Affecting Bitcoin Trends in the Second Half of 2024

In our previous article (July 28), we listed the top 10 narratives to watch for in 2024. In this issue, let's briefly review several factors that may influence Bitcoin's price movement.

1. Exchange BTC Balance

Aside from the reduction in Bitcoin mining due to the new halving in April this year, data from exchange Bitcoin wallet balances also shows that the amount of Bitcoin held by exchanges is steadily decreasing over time. From a medium to long-term perspective, this ongoing scarcity is likely to drive up Bitcoin prices. As shown in the figure below.

2. Spot Bitcoin ETF

Since the approval of the Bitcoin ETF in January this year, overall data indicates that the inflow of funds into Bitcoin ETFs has been quite strong. The approval of the ETF has also provided a new and sustained demand, which will have long-term implications. It seems that the rules of the crypto market are currently changing, but this change is just the beginning.

3. Other Influencing Factors

The first is the U.S. presidential election this year.

Setting aside political issues, let's consider the impact of the U.S. election on the crypto market. Currently, it seems many people believe that Trump has a higher chance of winning. Based on his recent attitude towards cryptocurrencies and his speech at the Bitcoin2024 conference a few days ago, his re-election could potentially boost the market, including cryptocurrencies. As shown in the figure below.

However, personally, I don't care much about who becomes president in the U.S., as I don't have voting rights. Looking at the currently popular candidates, Trump and Harris, Trump's attitude towards cryptocurrencies may indeed promote speculation and innovation in the short term, as he is unlikely to impose too many strict regulations. However, this could also lead to market volatility. On the other hand, Harris might impose new restrictions on cryptocurrencies, such as stricter regulations, which could limit some speculation and innovation in the crypto market. But from a longer-term perspective, the continuous implementation of various regulations is beneficial for the long-term development of cryptocurrencies (regulatory issues are something that must be faced eventually, such as stablecoin legislation).

The second is the global liquidity cycle.

The U.S. interest rate cuts not only affect the global pool of available funds (liquidity) but also influence the economic policies of other countries, such as the EU and major Asian nations. According to The Global Liquidity Cycle data, global liquidity hit a low in December 2022, and the next peak is theoretically expected to be reached around September 2025. As shown in the figure below.

The third is the expectation of U.S. Federal Reserve interest rate cuts.

Currently, many analysts have high expectations for the Fed to start cutting rates in September this year. Observing the data, it seems possible that the U.S. will begin a "soft landing" this year. As shown in the figure below.

Due to the FOMC meeting in the U.S. on Wednesday (July 31), the market is likely to experience volatility in the coming days.

The market expects the Fed to maintain interest rates this time but may signal a rate cut in September. However, from the current situation, this expectation seems to stem more from the immense pressure from various media, economists, analysts, and the market hoping that the Fed will announce a rate cut in September.

Before the September FOMC meeting, the U.S. will also release 2 CPI (Consumer Price Index) and 2 NFP (Non-Farm Payroll) data. Whether Powell will cater to market speculation is hard to say. There are essentially two scenarios:

• If he aligns with market speculation, the market may continue to experience volatility or see a small wave of new increases.

• If Powell continues to say things like, "We will cut rates when we ensure inflation returns to 2%. For this, we must rely on data, and we need to see the data coming out in the next two months," then the market may experience new and larger volatility due to investor disappointment.

4. Recent Hot Issues of Interest

In addition to the five main influencing factors mentioned above, many people may also be closely watching the latest actions of the three major Bitcoin holders: Mt. Gox, the U.S. government, and FTX, as they may continue to exert some selling pressure on the market.

Regarding Mt. Gox:

According to on-chain data monitoring, today (July 30) at 7:31, the Mt. Gox 12Rgp wallet address transferred 0.02 BTC (approximately $1,350) to an address starting with 1Adb and 0.0001 BTC to an address starting with bc1q. This operation may have been a test for the transfer. As of now, the Mt. Gox address still holds over 80,000 BTC, valued at $5.35 billion. As shown in the figure below.

Regarding the U.S. government:

Also today (July 30), according to on-chain data monitoring, the wallet address marked as belonging to the U.S. government (Bitcoin seized from Silk Road) bc1qje has transferred approximately 29,800 BTC (worth about $2 billion) to two new addresses, bc1qla and bc1qng. As of now, the U.S. government still holds nearly 183,000 BTC. As shown in the figure below.

Following the news, Bitcoin's price dropped from $70,000 to around $66,000 in just a few minutes. As shown in the figure below.

Regarding FTX Compensation:

According to relevant news, the liquidators of FTX Digital Markets Ltd. have recently initiated the next phase of the liquidation process. Customers of FTX.com need to choose whether to participate in the official liquidation process in the Bahamas (the Bahamas process) or the Chapter 11 case in the U.S. (the U.S. process), and must make their choice by 4:00 AM on August 17. As shown in the figure below.

According to previously disclosed court documents, FTX held various crypto assets such as SOL, BTC, and ETH, in addition to the $2.2 billion in cash received by SBF and other executives at the time of bankruptcy. As shown in the figure below.

Some statistics indicate that FTX is expected to repay $16 billion to creditors, and regarding specific compensation, FTX will conduct cash distributions (it is said that most of the previously held crypto assets have already been converted into cash through various means, so there will be enough cash for compensation, although I haven't found the specific data yet). If the users receiving compensation consider reinvesting in cryptocurrencies, this could lead to a reflow of some funds into the market. The two key dates for FTX compensation are August 17 (trustee voting) and October 7 (court approval deadline).

5. Summary

Regardless of the short-term influencing factors or various news, optimistically speaking, we estimate that before September, Bitcoin's price may return to the range of $71,000 to $73,000. Of course, price is merely speculation and not investment advice; occasionally writing about such price predictions is just because some friends like to see it. Personally, I never base my investment decisions on so-called predictions; I only choose to focus on long-term probabilities.

From a long-term perspective, regardless of which stage of the cycle you are in, you should hold BTC and ETH. Since you are already in this field, this is the most important thing to do. Of course, if you have enough patience, you can also adopt a DCA strategy to persistently invest monthly during a bear market, and then sell in batches when the bull market reaches your target levels. This basic strategy is one of the investment strategies that I have been advocating over the past few years. It is not an exaggeration to say that this is one of the easiest and least error-prone investment paths for ordinary people entering this field.

As for altcoins, my advice is that before deciding to invest in altcoins, it is best to hold ETH first, and then consider some long-term valuable altcoin projects. For example, AAVE, which is a leading project in the lending space, can be combined with the RWA narrative, most of its supply has been unlocked, the team has been consistently building, and the data on protocol revenue and active users is also good. Another example is Pendle, where YT and PT represent a great innovative play. Although there is ongoing unlocking, checking with the TokenUnlocks tool shows that the unlocked portion is mainly for liquidity incentives. It is said that the V3 version will be launched before the end of this year, and the data on protocol revenue and monthly active users looks good as well. And so on.

However, it is important to note that the examples of AAVE and Pendle mentioned above are just random examples to illustrate some basic points about considering issues from a medium to long-term perspective. This means that your vision should at least extend to considering these issues over a period of 6 to 12 months.

If you are just a short-term thinker or even a get-rich-quick enthusiast, then any so-called valuable projects may not seem like a quick path to wealth for you. Perhaps only MemeCoins are suitable for you to speculate on in the short term. However, it seems that today's MemeCoins are not just about intellect (buying strategies + selling strategies) but also about physical endurance (some people can stay up late to monitor various platforms for potential opportunities), speed, and technology (some not only use trading bots for sniping but also develop specialized monitoring tools to track new contracts, new pools, Smart Money, social data, etc.).

A couple of days ago (July 28), I saw someone in the group discussing a MemeCoin called NEIRO, which seemed to be very popular in some communities that day. I took some time to search for NEIRO, and the coin surged 1250 times within six hours of its launch. For instance, a certain wallet address bought 183 SOL at the opening, and if sold at NEIRO's peak price of $0.1, that trader would have made a profit of about $3.2 million that day.

This speed is not something that an average person can grasp unless there is a "night owl" expert to guide you. But the problem is that those who can "stay up late" to make money are also busy making money, right? Why would they want to help you get rich? The real big players who can achieve short-term wealth are focused on making money; they are unlikely to easily share their "wealth code" with you while making their own profits. Moreover, by the time some KOLs reveal it to you, many are hoping you will step in to take the fall. Anyway, I can't handle such late-night endeavors, haha.

As always, the point is that whether it's Bitcoin/Ethereum, altcoins, or various MemeCoins, for ordinary people, just do what you can do—engage in high-probability activities within your cognitive and physical limits. By grasping the cyclical patterns and maintaining patience, you will definitely reap rewards in the long run.

This concludes our content for this issue, which is also the 493rd article updated by Huali Hwa.