From August 27th to September 7th, Bitcoin continued to fall, dropping below $0.06 million, triggering market panic. During this period, the net outflow of the U.S. spot Bitcoin ETF for 8 consecutive trading days amounted to approximately $1.2 billion, and the total net assets of the ETF shrank by approximately $8.8 billion, which is a rare situation since the launch of the U.S. spot Bitcoin ETF.
On the evening of September 9th, Bitcoin stopped falling and rebounded. At the same time, data showed that the net inflow of the U.S. spot Bitcoin ETF turned positive, indicating an improvement in market sentiment. However, the market selling signal remains strong.
The selling pressure from major institutional players in the market has basically passed, and the fundamental situation of Bitcoin is improving. The subsequent price performance will depend on the Federal Reserve's interest rate cuts and the political changes in the United States regarding the cryptocurrency industry.
On-chain data shows that the risks have not been completely eliminated.
From multiple on-chain indicators, the market risks have not been completely eliminated, but the current position may be in the early stage of a bull market.
Bitcoin's 7-day moving average SOPR (Spent Output Profit Ratio) has fallen below 1.0, which means that sellers in the blockchain transactions are still profitable. However, it should be noted that historically, SOPR often falls below 1.0 before market consolidation occurs. The current decline is similar to the bear market phases in 2018 and 2019, when SOPR remained below 1.0 for a long time, indicating a potential market reversal.
SOPR is used to examine the ratio between the dollar value at the time of UTXO (Unspent Transaction Output) creation and the dollar value at the time of UTXO spending. A ratio of 0 is the dividing line, with a ratio higher than 0 indicating overall profitability of wallet transfers, and a ratio lower than 0 indicating loss-making sales.
In terms of the ratio of unrealized gains and losses, profits are still 6 times the total loss. On about 20% of trading days, this ratio is higher than the current value, indicating that short-term holders (STH) who represent the market's new demand have taken on most of the market pressure, as their unrealized losses dominate the market and have been increasing in magnitude over the past period. However, this unrealized loss relative to market cap indicates that the market has not entered a comprehensive bearish phase, but is closer to the volatility period of 2019.
Based on on-chain data pointing to key indicators such as seller risk ratio, market volatility may intensify in the near future.
Pay attention to positive news at the macro level.
With the launch of cryptocurrency spot ETFs and Wall Street funds entering the market, the correlation between the cryptocurrency market and the macro environment is increasing.
Selling pressure from the German government, Mt Gox asset management company, and other institutions has mostly passed, and improvements in the fundamentals are expected. At the same time, close attention should be paid to the US labor market, the Federal Reserve's interest rate cuts, and political changes in the US cryptocurrency industry.
The market generally expects that the Federal Reserve will announce its first interest rate cut in September.
In general, interest rate cuts are positive information for risk assets. Boosted by macro news, global risk assets, as well as Bitcoin, have experienced short-term gains.
The next meeting of the Federal Reserve is on September 18th and is currently in a blackout period, during which Federal Reserve officials will not publicly express their views on monetary policy unless under special circumstances.
On September 6th, the US Department of Labor released the August statistics, which showed that non-farm payrolls in the US increased by 0.142 million, lower than expected. The unemployment rate decreased by 3 basis points to 4.22%, performing stronger than the expected value of 3.7% and the previous value of 3.6%. Average hourly earnings in August increased by 0.4% on a month-on-month basis, slightly higher than expected.
The data is not sufficient for the Fed to cut interest rates by 50 basis points. A 25 basis point rate cut is the basic expectation, but if the labor market continues to deteriorate, there will be an open attitude towards a 50 basis point rate cut at subsequent meetings.
In the two weeks before the actual interest rate cut, market liquidity may face further restrictions. In the best case scenario, Bitcoin will fluctuate around current levels.
The fourth quarter of 2024 and the first quarter of 2025 may bring a wave of opportunities for Bitcoin, for four reasons:
1. Interest rate cuts, although not QE, are expected to increase activity in onshore funds.
2. The election, this election has public support for cryptocurrencies and commitments.
3. The halving effect of BTC has not been proven not to occur.
4. In December 2024, the new version of FASB will take effect, and cryptocurrencies can adopt fair value accounting standards in financial aspects and implement fair valuation.
From a macro perspective, BTC ETF resumed net inflows after 8 trading days, with a total net inflow of $28.6 million. However, the SEC warned of the risks of Bitcoin and Ethereum ETFs yesterday, calling BTC and ETH highly speculative investments, and further changes in the event need to be monitored. CPI data for August will be announced this Wednesday, which is the last important data before the Fed announces interest rate cuts in mid-September. There may be a second bottom in the market caused by risk aversion funds exiting, and investors should be alert to the risks.