Over the past week, the market has been filled with dramatic fluctuations, with almost all movements revolving around key macroeconomic data. Firstly, on June 11th, the US non-farm payroll data exceeded expectations, leading to a sharp drop of over 5% in Bitcoin; this was followed by the release of the US CPI data on June 12th, which was lower than expected by 0.1%, causing Bitcoin to rebound significantly by over 5%; finally, on June 13th, the Fed’s dot plot showed a smaller rate cut than the market had anticipated, resulting in Bitcoin once again plummeting by nearly 5%. In just three days, the market experienced two roller-coaster sessions, leaving many trend traders at the mercy of the main players. This phenomenon largely confirms a point made in a previous article: whether or not there will be a rate cut in September has become one of the most important strategic directions for funds in the second half of the year.
The most surprising market reaction among the three key macroeconomic trading points occurred after the inflation data was released on June 12th. Despite the actual Consumer Price Index (CPI) only being 0.1% lower than expected, well within the margin of error, the market still viewed this slight difference as a significant positive, indicating that the market’s obsession with macro data has reached almost pathological levels. The market’s fervor for macro data also highlights that in the absence of a convincing narrative in the crypto space, the market can only pin its hopes of unlocking valuation space on loose liquidity. Therefore, for leveraged traders, every window of opportunity for upcoming macro data needs to be approached with extreme caution.
Currently, the interest rate swap market shows that market participants expect a 90% likelihood of a 50 basis point rate cut by the Fed this year; however, there is significant disagreement on whether the first rate cut will be implemented in September. Over the past week, with the release of a series of macroeconomic data, the pricing of a rate cut in September in the swap market has been fluctuating violently between 50% and 70%. In this uncertain expectation, if the rate cut is indeed implemented in September as scheduled, it would not only mean an earlier timing of easing policies but also suggest that the extent of the easing may exceed market expectations (2-3 rate cuts). Of course, if the expectation of a rate cut in September falls through, the market will also react negatively. However, as analyzed in previous articles, it is highly likely that a rate cut will occur in September, although the market may still experience a strong shakeout before the cut.
Recently, there has been widespread discussion in the market about the absence of altcoins in the current bull market. However, few analyses have focused on the flow of funds and why the profitability of altcoins has rapidly declined after 2021. Data from CoinMarketCap and TradingView shows that Bitcoin’s market capitalization increased from $33 billion in January 2023 to $1.4 trillion in 2024, a rise of 324%. Meanwhile, the market capitalization of altcoins rose from $85 billion to $350 billion, an increase of 3.11%. Although Bitcoin has hit new highs in 2021 and altcoin market capitalization is close to 85% of the peak in 2021, a detailed analysis shows that out of the $265 billion growth, around $100 billion came from unlocked tokens, $60 billion from new token issuances, and only $105 billion from price increases due to token value. This means that over the past year, more than half of the inflow into altcoins was tied up in unlocking old tokens and new token issuances.
According to data from 10x Research and CoinGecko, the scale of unlocked altcoins in the next six months is expected to reach $200 billion, with a monthly issuance of nearly $60 billion in new tokens. This dumping of supply in the face of limited demand will lead to an increasingly severe liquidity crisis in the altcoin market.
In a situation of scarcity, expecting a repeat of the altcoin bull market of 2021 seems unrealistic. Therefore, even if there is an altcoin bull market in the future, it is likely to be a structural one.
Although unlocked tokens and new issuances are limiting factors for the rise of altcoins, for the blockchain sector still in a highly prosperous stage, the $225 billion altcoin market capitalization remains insignificant. In the future, projects driven by internal growth still have tenfold or even hundredfold growth potential. In short, market downturns still present opportunities to buy high-quality altcoins at low prices.
As the market enters a phase of stock competition, the power of discourse and pricing will gradually concentrate in the hands of groups with sufficient funds. In this frenzy of altcoins, the biggest winners are undoubtedly private equity (PE) and venture capital (VC) companies. They will continue to use their existing profit model: investing in and incubating new projects, then increasing valuations and cashing out by listing on exchanges. Therefore, short-term trading opportunities will continue to emerge in new or secondary coins. In the past month, the second wave of rallies for Binance’s new coins, BB, NOT, and IO, have been confirmed, and it is likely that ZK will follow this pattern.
