BTC price fluctuates downward, what will be the future trend of the Web3 market? | TrendX Research Institute

After experiencing a period of stagnation in the first two months, the cryptocurrency market in July failed to rebound as expected and instead faced greater setbacks. Negative factors such as the German government's sell-off and the Mt.Gox compensation plan intensified investor concerns, leading to a significant drop in the price of Bitcoin, which triggered a widespread decline across the entire cryptocurrency market. Despite the market being severely impacted, some positive factors such as large-scale repayment plans, rising expectations of interest rate cuts, and the results of the U.S. elections have led many to hope for a potential turnaround in the market in the fourth quarter of 2024.

Major Adverse Factors in the Current Market

Mt. Gox compensation triggers market turmoil: Bitcoin price plummets

The compensation issue of the Mt. Gox incident has attracted significant attention from the market. The potential selling pressure of over 280,000 cryptocurrencies triggered market panic on June 24, causing the BTC price to drop to around 60,000 dollars.

As the compensation officially began on July 5, BTC broke below the support level of $60,000 under immense pressure. During this process, BTC miners showed signs of capitulation. Historical experience suggests that this usually means the price has bottomed out. The last similar drop in hash rate occurred in 2022 when the trading price of Bitcoin was $17,000.

An industry expert believes that most market participants may underestimate the potential drop in Bitcoin over the next four months. The closest similar situation occurred in May 2021, when Bitcoin and other cryptocurrencies also experienced a parabolic rise. Currently, cryptocurrency leverage is approaching historical highs (excluding certain specific platforms), but under the current circumstances, our range time is longer (18 weeks compared to 13 weeks), and there has not yet been extreme liquidation. During the bull market from 2020 to 2021, we experienced similar situations multiple times.

Experts predict that the previously estimated low point of $50,000 may be too conservative, and the market could see a more extreme pullback to the $40,000 range. Such a pullback could cause significant damage to the market and may require several months of volatility or a downtrend (recovery period) before an upward trend reversal might occur.

The German government sells off: liquidating nearly half of its holdings.

In early July, the German government transferred more than 10,000 BTC in batches to cryptocurrency exchanges and market makers. This action caused the price of BTC to briefly fall below $55,000. However, according to information from a data platform, during the US stock market closing period (around 01:56 AM Beijing time on Tuesday), the German government address reclaimed 2,898 BTC, worth approximately $163 million, mainly from several major trading platforms.

Data shows that the German government's sell-off plan is nearly halfway complete. Since it began selling off last month, its Bitcoin holdings have decreased from nearly 50,000 to 27,461, with the current holdings valued at approximately $1.5 billion.

Despite the market downturn, data released by an asset management firm indicates that the inflow amount for digital asset investment products reached $441 million last week. Among them, Bitcoin investment products accounted for the largest share of the total inflow of crypto products ($398 million), making up as much as 90%. By region, the inflow of funds mainly came from the United States, amounting to $384 million. Other significant buying came from Hong Kong, China ($32 million), Switzerland ($24 million), and Canada ($12 million), while the outflow of funds from Germany was $23 million.

The Bitcoin mining market is building a bottom.

Recently, the price of Bitcoin fell to $54,000 (now recovered to $57,000), making survival even more difficult for miners who were already facing a sharp decline in profits due to the halving. According to surveys, if the price of Bitcoin drops to $54,000, only ASIC miners with an efficiency exceeding 23W/T can be profitable, and only a few models of miners can barely sustain this.

The selling behavior of miners is also considered to be part of the reason for this price drop. To cope with cash flow issues after the halving, the selling by mining companies continues; in June alone, 30,000 BTC from miners entered the market.

Data from a certain mining pool shows that, based on an estimated energy cost of $0.07 per kilowatt-hour, only ASIC miners with a unit power of 26 W/T or lower can be profitable when the price of Bitcoin is $54,000. Specifically, several mainstream mining machines can achieve break-even at prices of $39,581, $43,292, and $48,240, respectively. Other mainstream models need the price of Bitcoin to exceed $51,456, $53,187, and $54,424 to be profitable.

In this context, with the retreat of inscriptions, mining companies naturally choose to sell Bitcoin for survival, whether for cash flow reserves or for industry migration and exit.

Fortunately, as the price of Bitcoin declines, small and medium-sized mining farms are gradually shutting down, leading to a rapid decrease in Bitcoin mining difficulty, and the surrender of miners is about to end. On July 9, a data platform showed that Bitcoin mining difficulty was reduced by 5% to 79.5T, with the average hash rate across the network at 586.72EH/s over the past week. Since May, the number of Bitcoins sent to exchanges for sale by miners has significantly decreased, and over-the-counter trading volume has noticeably declined. As of June 29, the total trading volume at the OTC trading desks of mining companies has been exhausted, indicating that selling pressure has eased.

Overall, the price fluctuations of Bitcoin have had a huge impact on the survival of miners, but as the market adjusts, the selling behavior of miners is gradually decreasing, and the industry may usher in a new balance.

Positive Factors Worth Noting

The large-scale repayment plan is expected to drive new highs in the market.

According to a revised reorganization plan and disclosure statement submitted by a trading platform to the bankruptcy court in Delaware, USA, in May this year, the total value of assets that it expects to have collected and converted into cash for distribution will be between $14.5 billion and $16.3 billion, exceeding the $11 billion owed to customers and other non-government creditors. The surplus cash will be used to pay interest to the company's more than 2 million customers.

Currently, the platform has received court approval, and creditors can choose to vote on the compensation plan for cryptocurrency in cash or physical form. Creditors must vote by August 16, and the judge will decide whether to approve the plan on October 7. Once approved, the platform will repay creditors within two months, with an expected timeframe from the fourth quarter of 2024 to the first quarter of 2025.

Although the final compensation method has not been determined, a crypto analyst believes that given most customers are cryptocurrency enthusiasts, this fund of up to $16 billion will enter the crypto market and become a major catalyst for price increases. Bitcoin is expected to break $120,000, Ethereum will break $12,000, and other cryptocurrencies will increase by 10 to 50 times.

Clear interest rate cut expectations

The Federal Reserve's decisions on interest rate hikes and cuts are one of the important factors affecting the price of Bitcoin, and rate cuts usually drive the market to strengthen.

Recently, the Chairman of the Federal Reserve stated that inflationary pressures in the United States have eased, but the Federal Reserve needs more data to prove that the inflation risk has passed before deciding to cut interest rates. If rates are cut too early, inflation may rise again; if rates are cut too late, it could lead to a slowdown in economic growth or even trigger a recession.

Although the Federal Reserve stated that the timing of interest rate cuts is still uncertain, market expectations for rate cuts have risen as the latest U.S. economic data shows a slowdown in economic growth, such as the significant downward revision of non-farm payroll data for June and the unemployment rate rising to 4.1%, the highest since November 2021. According to a certain exchange's interest rate observation tool, as of July 9, the market expects the probability of the Federal Reserve cutting rates at the September meeting to rise to 73.6%, while the probability of keeping rates unchanged is 22.9%.

The encrypted accounting system is about to take effect.

In December last year, the Financial Accounting Standards Board in the United States released the first version of accounting rules for cryptocurrencies, requiring companies holding BTC or Ethereum to record the changes in their value at fair value and reflect them in net income. The new regulations will take effect for fiscal years starting after December 15, 2024, and will apply to both public and private companies in 2025.

For cryptocurrency assets, this change in accounting standards means that several large technology and financial companies will be able to record the highs and lows of their cryptocurrency holdings. This will drive further compliance in the crypto market and attract liquidity injections from mainstream financial markets.

Bitcoin Price Trends After Each Halving

There are only three types of market trends: upward, downward, and sideways. Regardless of how the future market changes, it ultimately cannot escape these three patterns. Trying to predict the direction of the market is a foolish act; we only need to know how to respond if the market moves in a certain direction.

If the market breaks through the current resistance level and stabilizes above 69000 points, it can be seen as the beginning of a bullish trend.

Two possible scenarios for the increase of ###:

1. Approaching the previous high but not breaking through: The market may be close to the previous high but has not managed to break through, or it may have slightly broken through and then retreated. In this case, do not be deceived by market illusions, and do not chase the highs. You may not even need to exit; just reduce your position size, especially if you feel that your holdings are too heavy.

2. Breaking previous highs and sustaining new highs: If the market breaks previous highs and sustains new highs for at least more than 3 days, attention should be paid to the strength of the breakout, observing whether there is a strong rally or a fluctuating upward movement within 3 days to 1 week. If the trend is strong and the price quickly rises after the breakout, positions can be held while waiting for a significant pullback (at least around 10%) to increase positions. If the trend is weak and the increase is slow, it is advisable to reduce positions at new highs to prevent false breakouts. Currently, the possibility of continued rising is relatively low. If the second situation occurs and the trend after the breakout is not strong enough, be wary of the risk of a significant decline. References to the market before and after previous halvings:

Second Halving (2016.07.10)

Before this halving, Bitcoin surged 78% in a month. After the halving benefits were realized, it experienced a deep pullback, dropping 30% in a week, with the maximum decline reaching even 40%. Then it began to rise steadily, increasing from under $500 to nearly $20,000. After the halving, the price of the coin corrected by 30%.

Third Halving (2020.05.12)

In 2020, due to the historically rare black swan event of 312, the market fell sharply before the halving. Ignoring this bearish factor, Bitcoin also experienced a 20% pullback in the week leading up to the halving. There was a rebound after the halving, but it did not rise significantly, and the market moved sideways. From the peak before the halving in early May, it remained volatile until breaking upwards at the end of July, oscillating for a full 3 months, during which there were also two pullbacks of over 10%.

From the previous two halvings, it can be seen that Bitcoin tends to experience a correction both before and after the halving. Now the market generally expects Bitcoin to rise after the halving, but what will happen this time? It may require further observation.

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