Bitcoin plummeted rapidly after 5 o'clock yesterday morning and at one point dipped to $0.058 million, the lowest in nearly ten days. Ethereum also temporarily fell below $2400.

In this intense volatility, over 0.086 million crypto investors have been wiped out in the past 24 hours, with severe liquidations. According to Coinglass data, leveraged futures positions worth 0.205 billion USD have been liquidated. In the past 24 hours, the total liquidation amount across the network exceeded 0.319 billion USD (long positions accounted for 0.28 billion USD), with over 0.086 million people being liquidated.

The sudden price crash occurred in a short period of time, indicating the lack of market liquidity and the sharp downturn in investor sentiment.

Just the day before, the price of Bitcoin was hovering around 26,000 USD, but with increasing selling pressure, the price quickly broke through several key support levels. This fluctuation not only caused significant losses to Bitcoin holders, but also affected other major cryptos. For example, Ethereum (ETH) plummeted to as low as 2,391 USD at one point in the past 24 hours, experiencing a sharp decline of 9.09%, similarly undergoing a substantial drop.

The impact brought by this market storm is astonishing, and investors should be highly vigilant about future trends!

What is the reason behind the recent decline?

0.03 million BTC transferred internally within Binance

Although it is just an internal transfer, such a large-scale transfer often triggers market panic, especially in the current unstable market sentiment. This situation can easily be misinterpreted as selling, leading to panic selling in the market. Moreover, the actual transfer could be 0.13 million BTC, further intensifying the panic sentiment.

Bitcoin spot ETF ARKB saw outflow of funds.

The significant outflow of funds from Bitcoin spot ETF is an important market signal.

Currently, the complete fund flow of the 12 US Bitcoin spot ETFs on the 27th has not been fully reported. However, it is worth noting that ARKB from ARK & 21Shares saw outflow of over $100 million, setting a record for the largest outflow in the fund's history.

In contrast, the largest outflow in the past from GBTC on the 27th was only $18 million. The reason behind the significant fund movement of ARKB is still unknown, but the sharp drop in BTC without any specific bearish news may indicate some unknown manipulation.

ETFs typically represent the confidence of institutional investors. When there is a large amount of fund outflow, it is often interpreted as these institutions being bearish about the market outlook, exacerbating market panic and causing further sell-offs.

Seasonal factors and portfolio reassessment.

September is the month marking the end of summer and the beginning of autumn, which usually triggers investors to reassess their portfolios.

After a relatively sluggish period in the market during summer, investors may make adjustments to their assets, leading to increased market volatility. This seasonal factor applies to the crypto market as well.

The liquidation of long leverage and the decrease in USD liquidity.

Leverage liquidation often intensifies the drastic price fluctuations, especially when the market's risk aversion sentiment rises.

In addition, the decrease in USD liquidity will also affect the global market, leading investors to reduce exposure to high-risk assets. Coupled with the market's anticipation of NVIDIA's financial report, investors may choose to avoid market volatility, further driving prices down.

Nvidia, as one of the largest companies in the world, is at the forefront of the AI boom and has been a major driving force behind the bullish US stock market performance over the past 12 months.

Not surprisingly, this bull market has spread to the cryptocurrency sector. Therefore, this is a bullish for cryptocurrency giants, and Bitcoin may not stay below $60,000 for the long term.

The future trend of BTC price.

The short-term market sentiment and technical aspects.

Bitcoin's short-term volatility has intensified, breaking through the key support level of $56,000, which has led to increased activity from short-term Bitcoin sellers, potentially triggering further selling. Meanwhile, Bitcoin's futures premium has stagnated, and professional traders advise investors to adopt a cautious attitude towards the current market trend.

In the short term, the fluctuation of bitcoin prices is still likely to be significant. Technical analysis indicates that bitcoin has recently broken through several key support levels (such as the 50-day moving average), which may lead to further probing. For example, if bitcoin cannot stabilize the $56,000 support level, the price may further decline.

In addition, short-term BTC sellers have become active. Manager XBT pointed out in a research report on August 27 that large short-term bitcoin sellers have become "active," explaining that although bitcoin successfully rose last week, some stagnant indicators have begun to show signs of activity again.

ManagerXBT wrote: "Short-term holders transferred 33,155 bitcoins, as indicated by the 1w-1m output age range. This could bring immediate selling pressure, and the slowed price suggests that bitcoin may trigger a free pullback.

He suggested that if these numbers increase in the coming days, one should be "extra cautious," and added that potential selling may become more intense.

The recent downward trend in BTC prices has not yet turned many bitcoin derivative traders into call, indicating their skeptical attitude toward the recent trend.

The bitcoin futures premium (a key indicator of derivative risk preference) has remained stagnant at around 6% over the past month. This indicates that many professional traders remain cautious about opening leveraged long positions.

Objective bullish factors

Despite bitcoin once again falling below the 0.06 million dollar mark, it has still risen by about 40% year-to-date. Analyst Ryan Rasmussen from crypto asset management company Bitwise holds an optimistic view of the future trend, stating that the current pullback is just a common selling-off in a bull market.

With the Fed's interest rate cut in place, will Bitcoin rise?

In fact, since Fed Chairman Powell's speech last week, the cryptocurrency market has experienced a roller-coaster ride.

On August 23, local time, Fed Chairman Powell announced at the "Global Central Bank Annual Meeting" that "the time for policy adjustments has come". The Wall Street Journal reported that this speech was the "strongest interest rate cut signal to date".

Powell abandoned the previous vague statements such as "wait and see," "reevaluate," and "gradual progress," clearly conveying a signal: the rate cut cycle has officially begun, and the market no longer needs to speculate! He also believes that the U.S. economy is growing at a "stable pace," with increased confidence that inflation will decrease to 2%, alleviating concerns of an economic recession. He did not mention a "gradual" interest rate cut, leaving room for more significant policy adjustments.

Following this statement, the cryptocurrency market began to soar, with Bitcoin rising from around $0.06 million. It briefly touched the $65,000 mark that day, and on August 26, it briefly surpassed the $65,000 mark, with other cryptocurrencies showing similar trends. Meanwhile, $0.251 billion flowed into spot Bitcoin exchange-traded funds (ETFs) on the previous Friday.

However, Bitcoin subsequently began to fluctuate and then accelerate its decline today. Institutional analysts believe that major tokens are digesting the boost they received last week from Powell's hint at lowering the benchmark interest rate, and the market has entered a period of calm after the initial reaction.

Although short-term price fluctuations may occur, historical data shows that during an interest rate cut cycle, Bitcoin often experiences a long-term upward trend. This is because an interest rate cut usually increases market liquidity and weakens the dollar, enhancing Bitcoin's attractiveness, especially as a hedge against inflation and a safe-haven asset.

Overall, although Bitcoin prices may continue to fluctuate in the short term, the Fed's interest rate cut cycle is expected to provide support for Bitcoin in the long run, driving its price to further rise in the coming months.

Bitcoin halving cycle boosts bull market.

The Bitcoin halving cycle refers to the event of mining rewards on the Bitcoin blockchain halving about every four years. This design aims to gradually increase scarcity and suppress inflation to ensure the long-term value of Bitcoin by reducing the supply of new Bitcoin.

Historical data shows that after each Bitcoin halving event, the market usually experiences several stages of reactions.

First is a period of price stability, during which the market gradually adjusts to the new supply level. Subsequently, with the increased scarcity of Bitcoin and rising demand, the price usually sees a significant increase. For example, after the halving in 2016 and 2020, the price of Bitcoin increased from a few thousand dollars to historic highs.

It can be confidently said that the much-anticipated parabolic rebound is imminent, more than 115 days after the fourth Bitcoin halving. According to the popular cryptocurrency analyst, PlanB, based on the Stock-to-Flow (S2F) model, the price of Bitcoin is expected to peak in 2025.

From a technical perspective, despite a recent death cross, the price of Bitcoin has consistently held above the daily 50 and 200 Moving Average (MA) lines. Since the collapse on August 5, the daily Relative Strength Index (RSI) has once again exceeded the 50% level, indicating a significant recovery in bullish momentum.

One analyst predicts that the price of Bitcoin may reach $0.15 million by the end of this year, but other indicators suggest an increase in short-term selling.

As a result, Bitcoin may be on the verge of what one analyst calls a "crazy season," with the price potentially soaring to $150,000 by the end of this year – although some believe that short-term oversupply may weaken the uptrend.

RealVision analyst Jamie Coutts stated in a post on August 26 that unless there are fundamental changes, the price trend of Bitcoin will still enter a 'crazy season', also known as the banana zone.

This term was created by RealVision founder Raoul Paul. The 'banana zone' refers to an extreme volatile and crazy surge phase in the Bitcoin market, where prices may soar quickly but also come with high instability and unpredictability.

In the attached chart, Coutts points out that in the previous two bull market cycles, Bitcoin reached historical highs within 365 days after reaching peak levels in the local US dollar index. He stated that if BTC follows the previous bull market pattern, by the end of this year, its price could surge over 100% from around $64,000 to reach $150,000.

If the Bitcoin halving cycle in 2024 overlaps with the rate cut cycle of the Fed, this could generate a strong dual drive for Bitcoin prices. On one hand, the halving event will reduce Bitcoin's supply, and on the other hand, a rate cut usually increases market liquidity, driving demand for high-risk assets. This combined effect could lead to a strong rebound in the Bitcoin market, possibly even doubling the price within a few months after the halving.

Historically, this combined effect was evident after the 2020 halving cycle when the loose monetary policy of the Fed combined with the Bitcoin halving, driving the price to unprecedented heights in 2021, peaking at close to $69,000.

Potential Risks

While a Fed rate cut is likely to provide strong upward momentum for Bitcoin prices, historical evidence suggests that rate cuts do not always directly lead to price rises for Bitcoin. In fact, during the last Fed rate cut cycle (2019), Bitcoin's performance was not as optimistic as expected.

At that time, Bitcoin rose from around $3,000 at the end of 2018 to $14,000 in June 2019. This surge occurred with the Fed's interest rates slightly above 2%. However, after the Fed actually started reducing rates, Bitcoin's price did not continue to rise. Instead, it dropped by over 40% from July 2019 to the end of the year.

Despite the central bank's interest rate cut at the time, which theoretically should increase liquidity and support the price of high-risk assets, Bitcoin still experienced a sharp decline, indicating that interest rate cuts are not necessarily advantageous to Bitcoin.

In addition, many analysts and BTC derivative traders believe that there is significant selling pressure on Bitcoin in September, primarily from profit-taking and portfolio adjustments.

September is usually a month for investors to reassess their portfolios, especially after a period of market downturn in the summer. Many investors may choose to take profits in September, particularly in high-risk assets like Bitcoin. This behavior can lead to significant selling pressure in the market, thereby depressing prices.

Furthermore, in a cautious market sentiment, investors may adjust their portfolio structure and reduce exposure to high-risk assets. This adjustment may also intensify the selling pressure on Bitcoin, further pushing prices downwards.

What should ordinary investors do?

The short-term volatility of the Bitcoin market can be very intense, but in the long run, the price trend of Bitcoin is usually more stable. Investors should focus more on the long-term trend rather than being disturbed by short-term fluctuations. If you are optimistic about the long-term prospects of Bitcoin, you can gradually increase your holdings when the price falls, instead of rushing to buy or sell your entire position.

In the current environment of intense volatility, investors should avoid investing all their funds in Bitcoin or any single asset. Diversification is an effective way to reduce risk. By diversifying investments across different asset classes, such as stocks, bonds, gold, and other cryptocurrencies, investors can mitigate the impact of price fluctuations of a single asset on the overall investment portfolio.

Despite the potential volatility and risks in the Bitcoin market, especially the selling pressure that may occur in the short term, the long-term outlook is still dominated by bullish factors. The combination of expectations for interest rate cuts by the Federal Reserve and the upcoming Bitcoin halving cycle in 2024 could provide strong dual drivers for the market. These factors are expected to promote Bitcoin's rise and attract more investors into the market.

However, investors need to remain cautious while enjoying the potential benefits brought by these bullish factors, as the future of Bitcoin, despite the challenges it faces, also holds promising prospects.