From a trend perspective, there is still significant upward pressure on Bitcoin, mainly due to miner selling, US government selling, and compensation from Mt.Gox and Genesis. It is expected to take some time to digest these factors.
Bitcoin’s journey to $70,000 is a major roadblock
A very accurate indicator for buying Bitcoin
The future development of Bitcoin
Conclusion
On August 5th, Bitcoin experienced a sharp decline, causing many whales to face liquidation and the market to be in turmoil. Many people attribute the market crash to expectations of a US economic recession and the strengthening of the Japanese yen, but they seem to overlook the significant selling pressure within the market itself. In addition, the market has placed too much emphasis on the impact of incidental factors on the development of the Bitcoin market trend. From the perspective of least resistance, these incidental factors only increase the depth of the decline. The author focuses on trend analysis of Bitcoin and our previous articles basically align with the basic trend of Bitcoin. This article aims to provide some trend analysis perspectives on Bitcoin without considering incidental factors for readers’ reference.
Between the sharp decline and the sharp rise, there are always various reasons that make users bullish or bearish, which creates the core of the long and short game. Therefore, when discussing trend development, it is necessary to clearly discuss the length of the cycle. If we look at the overall perspective of the bull market, it is still difficult to say that the cyclical rules of the bull market have changed. This article still leans towards the bull market in the future. From a macro perspective, although recent US employment data fell short of expectations, more data is still needed to confirm a US economic recession. It is too hasty to completely switch to a bearish stance at this time. This article focuses more on the trend changes between weeks and months, which is also a characteristic of our previous trend research articles. Below, this article attempts to discuss the internal causes of the current market decline from a trend perspective.
The author previously believed that the reason for the turnaround at the end of July was mainly due to two dimensions: 1. Analysis of the German government’s selling and Mt.Gox’s selling; 2. The impact of Trump’s speech. Specifically, after the German government’s selling ended, market panic subsided, but the market underestimated the selling pressure from retail investors during Mt.Gox’s compensation, as retail investors tend to buy high and sell low. With the stimulation from Trump’s speech, the cryptocurrency market experienced a significant rebound. However, when the market failed to break through $70,000, the bullish momentum weakened.
Why does the author believe that Bitcoin will have an opportunity to enter in August after Trump’s speech? There are three indicators worth noting. First, after Bitcoin reached $70,000, the purchasing momentum of Wall Street institutions was insufficient, which can be confirmed by their historical holdings. Currently, institutions are still in the accumulation stage, and their willingness to aggressively push the price up is not strong. In addition, Bitcoin miners started selling at $70,000. As early as June 13th, CryptoQuant posted on X platform, stating that Bitcoin miners were under pressure and had started selling, with recent increases in mining pool migration, OTC trading volume, and significant reductions in holdings by large mining companies. When the price of Bitcoin fluctuated between $69,000 and $71,000, miners increased their selling pressure. Data shows that on June 10th, miners sold 1,200 Bitcoins through OTC transactions, the highest daily trading volume in two months. Another factor is the seasonal characteristic of Bitcoin in August, which is also similar from a macro perspective.
These three indicators to some extent have already suggested the weakness of the bulls. At this time, if there are bearish factors from a macro perspective, it is difficult to contain this decline. Other macro bearish factors include the US employment data falling short of expectations, the strengthening of the Japanese yen, the US government releasing approximately 28,000 Bitcoins, the distribution of 33,960 Bitcoins in the Mt Gox settlement, and the distribution of $1.5 billion worth of Bitcoins and Ethereum to Genesis creditors. These massive selling pressures are difficult to resolve in the short term, coupled with whale liquidation, ultimately leading to a market crash.
The author believes that when Bitcoin reached around $70,000 at the end of July, it was indeed difficult to make a direct decision to short, but based on the above trend analysis, it is not difficult to hedge and wait for more favorable factors to appear. However, when Bitcoin crashes, there is a very accurate indicator for bottoming, which is the shutdown price of miners. This is a very precise indicator that has been tested in many bull and bear cycles.
According to data from Poolin, the shutdown price of the mainstream Bitcoin miner Antminer S19XP is $54,507, and the Antminer T21 is $48,169. For Bitcoin, the range of $48,000 to $54,000 has essentially formed a very important price support zone, especially when Bitcoin falls below $63,000, investors should consider gradually building positions at this level. This is almost a bottoming range that can be confirmed without much technical analysis or market analysis.
In addition to the above intuitive data, Ki Young Ju, CEO of CryptoQuant, provided a valuable statistical analysis. On August 6th, Ki Young Ju stated in a post on X that the cost basis of Bitcoin is as follows: ETF/custodial wallets $65,000, Binance traders $55,000, miners $45,000. In previous market downturns (May 2022, March 2020, November 2018), prices below these levels confirmed bear markets. Whales with long-standing positions have a cost basis of $22,000. As mentioned above, Bitcoin is still mainly in a bull market from a major trend perspective, and from the perspective of miner shutdown price, $45,000 is almost the limit for Bitcoin’s decline.
What is the future development of Bitcoin’s price? From the current dominant factors, the US macro perspective is still a major influencing factor. So how do market influencers view the future development of the US and Bitcoin?
Goldman Sachs CEO Solomon expects that the Federal Reserve will avoid emergency rate cuts because he believes that the US economy will not fall into a recession. Solomon said, “I don’t expect to see any progress before September. The economy will develop steadily and there may not be a recession. Based on the economic data we are seeing and the information released by the Federal Reserve, I think there may be one or two rate cuts in the fall.”
Cryptocurrency analyst Alex Krüger stated in a post on X, “This round of market collapse is obviously driven by macro factors, not specific to the cryptocurrency industry.” A financial crisis caused by a large number of leveraged speculators in Japan is much better than a financial crisis caused by the US entering a recession. As for US data, the current focus is on the job market, so special attention should be paid to the initial jobless claims data to be released this Thursday (which usually is not data that affects the market), as well as the state employment data to be released on August 16th (which provides detailed state-level employment data and is rarely followed by the market).
On August 6th, 10x Research stated in its latest report that many people attribute the selling of Bitcoin to the unwinding of the yen carry trade, but the reality is much more complex. Since mid-March, Bitcoin has been vulnerable, despite a 15% increase in the Nasdaq index and a 10% depreciation of the yen during this period, Bitcoin has been in a range-bound state. Arbitrage trading relies on the sustained high interest rates in the United States, which are unlikely to continue. The rules of the game have changed. In the past 24 hours, the trading volume in the cryptocurrency market has reached $244 billion, the highest level since March 6th. Bitcoin experienced a large number of liquidations on the day it reached a new all-time high. With the emergence of new price-driving factors, the financial market is like a jigsaw puzzle that needs regular reassembly, and this is one of those times. Unlike the significant declines that were mitigated by increased leverage in April and June, this time there may not be such a reversal.
On August 6th, QCP Capital stated in its latest analysis that emergency rate cuts are unlikely because they would severely damage the reputation of the Federal Reserve, exacerbate market panic, and make people believe that an economic recession is imminent. In addition, yesterday’s risk-off sentiment has washed away a considerable portion of leverage. With the price plummeting, now may be a good time to consider accumulating BTC and ETH spot positions. It is still too early to conclude whether the market has returned to normal. Although the VIX index has fallen from its peak of over 65 yesterday, it is still above 30.
On August 6th, Coinbase researcher David Duong stated that Tuesday’s market conditions indicate that there may be short squeezes as buying activity on centralized exchanges increases, which may lead to a market rebound in the coming days. In addition, Genesis is distributing Bitcoin and Ethereum in physical form as part of its bankruptcy liquidation plan, and the unwinding of the yen carry trade may also affect the decision of Mt.Gox creditors to receive Bitcoin. The recent market decline does not indicate a new long-term trend or the beginning of a market cycle.
From a trend perspective, there is still significant upward pressure on Bitcoin, mainly due to miner selling, US government selling, and compensation from Mt.Gox and Genesis. This creates significant upward pressure on Bitcoin, which will take some time to digest. However, once Bitcoin enters the range of $48,000 to $54,000, investors can gradually start accumulating. According to the predictions of Goldman Sachs analysts, the Federal Reserve may cut interest rates one or two times this fall, which will provide positive momentum for Bitcoin. In addition, with the US presidential election approaching, Trump’s radical rhetoric will help restore market sentiment and drive Bitcoin’s rise. However, the author is more optimistic about the market in the first half of next year, because the market will have digested the recent massive selling pressure and the Federal Reserve’s interest rate cuts will provide sufficient funds for the cryptocurrency market.