The cryptocurrency community has its own version of the 618 shopping festival.
After experiencing a week of decline, on June 18th, the market once again experienced a significant earthquake. In the early morning, Bitcoin fell below the rare market support price of $65,000, and Ethereum followed suit, dropping below $3,400, with a 24-hour decrease of 6.23%. The king of MEME coins, SOL, also struggled, dropping to $127.22 USDT at one point, a decrease of 10.98%.
While mainstream coins were bleak, the situation for altcoins was even worse. Altcoins generally showed a “crashing” trend, with most of them dropping by over 20%. ZK, which was just launched, briefly fell below $0.2 USDT, with a decline of over 36%. According to Coinglass data, as of 2 PM yesterday, the total amount of liquidation across the entire network in 24 hours was $318 million, with the majority of liquidations occurring in long positions, amounting to over $270 million. As a result, the cryptocurrency market cap also shrank again, falling to a low of $2.46 trillion.
Despite Bitcoin recovering to above $65,000 today, the market is still showing signs of pessimism. Just a few months ago, the general consensus was that Bitcoin would reach $100,000 by the end of the year, signaling the start of a bullish market. This begs the question: what exactly has happened?
Replaying the results, it is difficult to escape the issue of attribution, but discussing the recent decline in Bitcoin ultimately boils down to insufficient liquidity.
The core factor driving the recent rise in Bitcoin was undoubtedly the Bitcoin spot ETF. The rapid influx of institutional funds led to a surge in demand for Bitcoin, driving the price from $40,000 to $73,000, ultimately providing crucial support for the Bitcoin consensus. However, this consensus has recently faced a backlash. From June 10th to June 17th, Bitcoin ETFs have been experiencing net outflows, with outflows reaching $810 million in the past week, indicating a gradual decline in institutional buying power.
This trend is also evident in the decreasing turnover rate on the BTC chain, with a 24-hour turnover rate of only 3.91%. Exchange balances are also decreasing, with BTC exchange balances reaching nearly historic lows over the past week. As of June 19th, the BTC exchange wallet balance was 2.4765 million, reflecting poor selling sentiment.
Behind the data is a weakening macroeconomic outlook. At the monetary policy meeting on June 12th, the Federal Reserve kept the federal funds rate target range unchanged at 5.25% to 5.5%, in line with market expectations. However, the dot plot released showed that Fed officials predicted that the median federal funds rate would decrease to 5.1% by the end of 2024, meaning that there may only be one rate cut this year, down from the previous prediction of two cuts. After this news, risk markets were visibly affected, with the cryptocurrency market taking a hit, leading to over $600 million in digital asset investment products exiting the market.
On the other hand, the so-called “miner surrender” is also affecting the price of Bitcoin. Following the halving, due to the increasing mining costs, miners are facing a cash flow crisis, leading to a significant increase in mining pool transfers, OTC trading volumes, and large listed mining companies selling off their holdings. Only on June 11th, the world’s largest Bitcoin mining company, Marathon Digital, sold 1,200 BTC, the largest daily sell-off since the end of March. Looking at June as a whole, the off-exchange trading desk balance of Bitcoin miners exceeded 54,000 BTC, reaching the highest level in a year.
Despite the negative news, the $65,000-69,000 price range is still the area where the largest number of BTC investors entered the market, making it more likely for Bitcoin to experience a reluctance to sell at this price. This also relates to changes in ownership, as high-net-worth investors entering the market means that short-term returns are unlikely to be the main factor affecting sales. Therefore, this somewhat boring and concentrated market trend is likely to continue.
While Bitcoin has institutional support, other cryptocurrencies have not been so lucky. In traditional bull market transmission, the general path is from high-stability assets gradually flowing out to low-stability assets, from low-yield sources to high-yield preferences, namely mainstream coins, altcoins, MEME coins, and other sectors. However, this path has not been as successful this year.
The significant characteristic of this bull market is the liquidity siphoning effect, with a large amount of liquidity entering the Bitcoin ecosystem, but new institutional money has not spilled over into other areas, and there is a lack of strong applications emerging in the public chain ecosystem. Value coins have not performed well and have been surpassed by MEME coins.
The controversy surrounding VC tokens has exacerbated this situation, as linear unlocking of VC tokens has led to a significant increase in selling pressure, with a large number of tokens having no buyers after the unlocking period, making retail investors the victims of liquidity. The prices of tokens have also further decreased. According to the Token Unlocks report, it is estimated that approximately $155 billion in tokens will be unlocked from 2024 to 2030, meaning that the market needs to increase liquidity by at least $80 billion to absorb this. In the past week, projects such as Aptos, Immutable X, Strike, Sei Network, Arbitrum, and ApeCoin have sold tokens worth $483 million due to large unlockings.
With no innovation in applications, a mismatch in supply and demand, and limited liquidity, altcoins have performed extremely poorly since March, with fair launches and the money-making effect not as strong as MEME coins, and not as strong as mainstream coins. This has become a dilemma for investors, as the previous prediction was that there would be no altcoin market in this bull market. Additionally, due to the impact of last week’s CRV liquidation, altcoins have been bloodied once again.
In fact, the market’s consensus of the bull market has already lasted for more than half a year, but the visible effect of making money is diminishing. Except for a few retail investors who have been lucky to hit the jackpot with MEME, airdrops, and altcoin contracts, or those who have profited by holding Bitcoin, the majority of the market’s wealth has been distributed to the top exchanges, CeFi, DeFi, and the projects that have previously raised funds through coin offerings, further exacerbating the weak money-making effect and the disagreement on value, which has led to the current situation of non-reciprocal market conditions.
In this context, how to break through has become the focus of market discussion. With the current situation, the market’s rise is mainly driven by information. The most direct improvement may be the entry of macro liquidity, which is why everyone is paying so much attention to the Fed’s interest rate cuts. In fact, after the European Central Bank announced an interest rate cut, the cryptocurrency market experienced a small but significant increase, stimulating the market. However, there are still doubts as to whether liquidity can reach other segments besides mainstream coins.
From a macro industry perspective, another potential positive news could come from the U.S. election. As the election approaches, the battle between Trump and Biden over cryptocurrencies is intensifying. Following the acceptance of cryptocurrency donations and the surge in popularity of NFTs, Trump has been actively supporting Bitcoin mining, publicly advocating for all remaining Bitcoin to be mined in the United States, and even stating that he wants to become an advocate for Bitcoin miners in the White House, saying that miners can help stabilize the energy supply of the power grid. Biden has also changed his cautious stance, and will participate in a Bitcoin roundtable meeting for the first time in early July.
The stance of both sides has turned cryptocurrency into a political bargaining chip, which has led to a new era of cryptocurrency regulation. Ethereum ETF is a typical example. In a state of hopelessness, it completed a historic reversal. Consensys recently announced on social media that the SEC has concluded its investigation into Ethereum 2.0, confirming that ETH is not a security, leading to a long-awaited increase in the Ethereum ecosystem. According to Bloomberg analysts, the Ethereum spot ETF is expected to be launched before July 2nd. Compared to Bitcoin’s siphoning effect, the growth of the Ethereum ETF is more likely to directly stimulate the ecosystem market, making it the most predictable positive news in the near term.
However, analysts and institutions have different views on the future price and market conditions.
Different from the previously recognized bullish sentiment, after 618, some analysts believe that the decline will continue. According to the well-known cryptocurrency analyst Rekt Capital, a BTC price cluster has formed near the high point of $71,600, indicating that there is more potential downward movement, possibly needing to drop below $64,000 to achieve a healthy reset. Trader Titan of Crypto even believes that based on the technical pattern on the monthly chart, Bitcoin may break below the $60,000 mark on July 1st. On X platform, on-chain analyst Ali also stated that historically, Bitcoin generally performs poorly in the third quarter, with an average return of only 6.49% and a median return of -2.57%.
However, overall, the general view among institutions is to be bearish in the short term and bullish in the long term. QCP Capital, Bitfinex, and 10x all emphasize that BTC will continue to rise, with a consensus of reaching $80,000 to $120,000 by the end of the year. Whales also seem to hold the same view. Lin Chen, the head of Deribit’s Asia Pacific business, revealed on social media that a whale had sold call options for 70,000 at the end of July and entered call options for 70,000 at the end of the year, totaling 100 BTC, paying out $883,000, demonstrating the whale’s relatively negative attitude towards the price signal in the short term.
For altcoins, the controversy is even more apparent. Quinn Thompson, the founder of the crypto hedge fund Lekker Capital, believes that in the current context of high leverage, open interest contracts, lack of panic buying, and stagnant stablecoin supply, the best course of action is not to buy altcoins.
However, Andrei Grachev, the co-founder of DWF Labs, believes that as long as Bitcoin remains stable, the next few months will see a resurgence of the altcoin market. Arthur Hayes, the founder of BitMEX, even stated on June 7th that it is the best time to buy altcoins and has recently indicated that a Dogecoin ETF will be approved at the end of this cycle, and has emphasized on social media that he is increasing his holdings in PENDLE and DOGE.
In any case, the current market does present a rather boring trend, and the more boring the trend, the more cautious investors should be. After all, in these times, both project parties and large entities are often the most anxious, and being eager to spend money is not a wise move for any user.
