Bitcoin ETF investors face a $2 billion loss; what should ordinary investors do?
Three major uncertainties coexist, and investment can also "take advantage of the fire."Author: 10x Research
Compiled by: Wenser, Odaily Planet Daily
Editor’s Note: As we approach the interest rate cut in September and the U.S. presidential election debates, the well-known crypto research institution 10x Research has conducted an in-depth analysis of the current market situation, identifying three major uncertainties, particularly noting that Bitcoin ETF investors are facing potential losses of up to $2 billion. This article compiles and shares the relevant views of 10x Research for readers' reference.
Impact of Market Uncertainties: Watching and Testing Support Levels
Currently, the two main uncertainties in the market are the Federal Reserve's actions in September and the outcome of the U.S. presidential election.
In the next two weeks, as the Federal Reserve enters its (pre-policy announcement) quiet period, the (traditional) financial markets may remain in a wait-and-see mode.
On the other hand, Bitcoin is testing its technical support levels. *** (Odaily Planet Daily Note: According to chart information, 10x Research believes that Bitcoin's technical support level is around $49,100 to $52,599.) ***
Bitcoin Technical Support Level Testing
We expect the Federal Reserve to cut rates by 50 basis points to stay ahead amid economic fluctuations. Given the lagging effects of monetary policy in the coming quarters, a 25 basis point cut may still be insufficient to avoid greater damage to the economic situation.
While a 50 basis point cut may convey deeper concerns to the market, the Federal Reserve's primary focus is on mitigating economic risks rather than managing market reactions. Despite the probability of a 50 basis point cut being only 29%, this situation undoubtedly contradicts our views and the general consensus. More and more people believe that the Federal Reserve's judgment is lagging behind the current situation—after being caught off guard by various market data in July, they overlooked signs of a weakening labor market.
Higher Probability of Trump Winning, Presidential Debate May Clarify Election Direction
In the political arena, the prediction market Polymarket shows a 51% chance of Trump winning the election, while Kamala Harris stands at 46%. Notable political analyst Nate Silver's predictions also provide corresponding ratios: Trump has a 63.8% chance of winning; in contrast, Harris's chance is only 36%, marking a new high in Trump's support. The main reason for these predictions is the Democratic National Convention, where Harris reaffirmed her commitment to a high-tax policy agenda.
However, Allan Lichtman, who accurately predicted 9 out of the last 10 presidential elections using the "13 Keys" method, currently predicts that Harris will win this year's presidential election, as in his model, Harris holds 8 out of the 13 keys (the probability of winning is equivalent to 8/13).
The "Harris vs. Trump Presidential Debate" on September 10 (this Tuesday) is expected to provide a clearer picture for this campaign. So far, Harris has avoided significant media exposure, relying on favorable media coverage rather than direct engagement with voters, giving the impression that the Democratic leadership is orchestrating her campaign and shaping the narrative, rather than Harris herself taking the lead. Although specific established forces are coordinating efforts behind the scenes, we still lean towards a Trump victory, just as we did in our 2016 prediction.
CPI Release Approaches, Bitcoin Rebound in Progress
The U.S. CPI report released the day after the election debate will be more significant than ever. Currently, the market expects a significant drop from 2.9% to 2.6%, which could provide ample justification for a 50 basis point cut by the Federal Reserve. The current Federal Reserve rate is between 5.25% and 5.50%, and monetary policy with rates above 3.0% is generally considered tight, so the range for rate adjustments could be about 200 basis points higher. This view is somewhat confirmed by the 2-year Treasury yield, which anticipates a 160 basis point cut. Unless CPI data remains at 2.9% or higher, we expect a 50 basis point cut.
Previously, the market widely anticipated six rate cuts in 2024; however, at the FOMC meeting in March, Federal Reserve Chairman Powell emphasized the need for a more flexible approach to rate cuts due to ongoing uncertainties in economic development, especially after mixed inflation data and signs of slowing economic growth. At the same time, he acknowledged the significant difficulty in reaching the Federal Reserve's 2% inflation target. Bitcoin reached a price peak when the March CPI data exceeded expectations but fell sharply after the March FOMC meeting, highlighting the critical importance of the following ten days.
After the March FOMC meeting, inflows into Bitcoin spot ETFs lost momentum. Although inflows in May and July saw some recovery, the average entry price for ETFs remains close to $60,000. $17 billion in inflows faces a $2 billion loss (with the current BTC price around $53,000). This week, the U.S. presidential debate may help alleviate some election-related uncertainties, but on the other hand, the FOMC meeting may increase uncertainty—because after the recent downward revision of labor market data, the Federal Reserve may emphasize concerns about economic downside risks.
After last week's sharp decline, Bitcoin is attempting to achieve a price rebound. Two of the three reversal indicators have recovered from deeply oversold levels, further indicating the potential for a short-term rebound and counter-trend rally. Historically, Bitcoin has reached relative lows when the stochastic indicators hit similar levels in the last three instances.
Stochastic Indicators Show Potential Reversal Ahead
Operational Reference: A Perspective of Seeking the Sword in the Boat, Pay Attention to $52,600 and $49,100 Levels
Given the current technical analysis, establishing new short positions at higher levels may be more advantageous.
A tactical approach to consider is to close short positions and wait for Bitcoin to approach the $58,000 level, especially before the "Harris vs. Trump Debate," when market traders may generally hold an optimistic view of a "Trump victory."
After breaking below the $56,000 support level, Bitcoin precisely fell to $52,600, the price peak from February 2024, establishing a medium-strength support zone. In February, Bitcoin rebounded at the end of the month, after which MicroStrategy purchased 3,000 BTC and then acquired another 21,000 BTC by mid-March, marking the peak of the price rebound.
Based on the tactical long positions for short-term technical reversals before Tuesday's presidential debate, $52,600 should be set as the stop-loss point. The next support level is at $49,100, which was the price peak when the Bitcoin spot ETF was issued in January, and this level also triggered a reversal in Bitcoin's decline in early August.
It is worth mentioning that while these may only be temporary rebounds, they could provide tactical long-term trading opportunities. Lower CPI data may also provide temporary momentum for bullish forces. However, as the FOMC meeting is expected to trigger more uncertainty next week, and with significant uncertainty remaining regarding the outcome of the U.S. election amid rising optimism about Trump's potential victory (as the election debate occurs on Tuesday), Bitcoin may continue to seek stronger support levels to initiate a more significant rebound before the end of the year.
In summary, the three major uncertainties—the U.S. presidential election, CPI data report, and the Federal Reserve FOMC meeting—may increase volatility, but tactical traders can still take advantage of this uncertainty to profit.
