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

After experiencing the downturn of "May's poverty" and "June's despair," the cryptocurrency market in July did not rebound as expected. On the contrary, a series of negative factors exacerbated investors' panic, leading to a decline in Bitcoin prices, which in turn dragged the entire crypto market down. Despite the heavy blow to the market, the accumulation of multiple positive factors has led many to still hope for a turnaround in the market in the fourth quarter of 2024.

Current important negative factors

Mt. Gox compensation triggers market panic: Bitcoin price plummets

The compensation issue of the Mt. Gox incident has attracted significant attention in the market. The potential selling pressure of approximately 142,000 BTC and 143,000 BCH once triggered market panic on June 24, causing the price of BTC to drop to around 60,000 dollars.

With the official launch of Mt. Gox's compensation on July 5, BTC has broken below the support level of $60,000 under heavy selling pressure. During this process, BTC miners showed signs of capitulation. Historical experience indicates that this usually means the price has hit the bottom. The last comparable drop in hash rate occurred in 2022 when the trading price of Bitcoin was $17,000.

A partner at an investment firm believes that most market participants are not aware of the seriousness of the potential drop in Bitcoin's four-month volatility range. Currently, cryptocurrency leverage is nearing historical highs (excluding CME), but in this case, our range time is longer (18 weeks compared to 13 weeks), and there has not yet been extreme liquidation.

The initially estimated low point of $50,000 may have been too conservative, and we might 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 consolidation/downtrend (recovery period) before a reversal to an uptrend could occur.

German government sells off: liquidating nearly half

During the morning session of the day, the German government transferred its holdings of over 10,000 BTC in batches to exchanges and market makers. This action caused the price of BTC to briefly drop below $55,000. However, according to data from a certain platform, by the US stock market closing period (around 01:56 AM Beijing time on Tuesday), the German government address had reclaimed 2,898 BTC, worth approximately $163 million, mainly from several major exchanges.

According to the data, the German government's sell-off plan is nearly halfway completed. Since the sell-off began last month, its Bitcoin holdings have decreased from nearly 50,000 to 27,461, with the current holding valued at approximately $1.5 billion.

Recent headlines in the industry have focused on events such as the German government's sell-off and the Mt.Gox refunds. Many analysts believe this is the main reason for the recent sharp decline in Bitcoin. However, analysts from a certain trading platform attribute the drop to normal seasonal weakness.

Despite the market downturn, data released by an asset management company 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), with a proportion as high as 90%. Regionally, the inflow of funds mainly came from the United States, amounting to $384 million. Other significant buying came from Hong Kong ($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底

Recently, the price of Bitcoin dropped to $54,000 (it has now recovered to $57,000), making survival even more difficult for miners who have already seen their profits plummet due to the halving. According to a survey, if the price of Bitcoin falls to $54,000, only ASIC miners with an efficiency exceeding 23W/T can be profitable, with only a few models of miners able to barely sustain.

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

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

Against this backdrop, as the inscription tide recedes, 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, and the difficulty of Bitcoin mining is rapidly decreasing, signaling the end of miners' surrender. On July 9, data showed that the difficulty of Bitcoin mining was adjusted down by 5% to 79.5T, with an average network hash rate of 586.72EH/s over the past seven days. Since May, the amount of Bitcoin sent to exchanges for sale by miners has significantly decreased, and the over-the-counter trading volume has dropped noticeably. On June 29, the total trading volume at over-the-counter trading desks of mining companies had been exhausted, indicating that the selling pressure had eased.

Overall, the price fluctuations of Bitcoin have had a significant impact on the survival of miners, but as the market adjusts, miners' selling behavior is gradually decreasing, and the industry may be entering a new equilibrium.

Positive factors worth paying attention to

The repayment plan of a certain trading platform is expected to drive the market to new highs.

According to the revised reorganization plan and disclosure statement submitted by a certain 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 excess cash will be used to pay interest to the company's more than 2 million customers.

Currently, the platform has obtained court approval, and creditors can choose to vote on the cryptocurrency compensation plan in cash or in kind. 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, some crypto analysts believe that given the majority of clients 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 altcoins will rise 10 to 50 times.

Clear expectations for interest rate cuts

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

Recently, the Chairman of the Federal Reserve stated that inflation pressures in the United States have eased, but the Federal Reserve needs more data to prove that inflation risks have 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 and even trigger a recession.

Although the timing of interest rate cuts is still uncertain, market expectations for rate cuts have increased as the latest U.S. economic data shows a slowdown in economic growth. For example, the June non-farm payroll data was significantly revised downward, and the unemployment rate rose to 4.1%, the highest since November 2021. According to a certain 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 maintaining the current rate is 22.9%.

The cryptocurrency accounting system will soon take effect.

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

For crypto assets, this change in accounting standards means that several publicly listed 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: rising, falling, and oscillating. No matter 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 develops 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 an increase:

1. Approaching but not breaking past highs: The market may be close to previous highs but has not been able to break through, or it may have only slightly broken through before pulling back. In this case, do not be misled by market illusions, and do not chase the highs. You may not even need to exit; just reduce your position slightly, 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 continues to reach new highs, and stabilizes for at least more than 3 days. At this point, pay attention to the strength of the breakout, and observe if there is strong upward movement or a sideways rise within 3 days to 1 week. If the trend is strong and there is a rapid increase after the breakout, you can hold your position and wait for a significant correction (at least around 10% correction) to add to your position. If the trend is not strong and the increase is slow, it is recommended to reduce positions at new highs to prevent false breakouts. Currently, the likelihood of continued upward movement is low. If the second situation occurs and the trend is not strong enough after the breakout, be wary of the risk of a sharp decline. References for previous market conditions before and after the halving:

Second Halving (2016.07.10)

Before this halving, Bitcoin surged 78% within a month. After the halving benefits were realized, it experienced a deep pullback, dropping 30% in a week, with the maximum decline even reaching 40%. Then it began to rise all the way, going from less than $500 to nearly $20,000. After the halving, the price corrected by 30%.

Third Halving (2020.05.12)

In 2020, due to the historically rare black swan event of 312, the market experienced a significant decline before the halving. If we disregard this negative factor, Bitcoin also saw 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 went through a period of volatility. From the peak before the halving in early May, it oscillated until the end of July before breaking upward, experiencing three full months of fluctuation, during which there were also two instances of over 10% pullbacks.

From the previous two halvings, it can be seen that Bitcoin tends to experience a pullback before and after the halving. The market generally expects Bitcoin to rise after the halving, but what will happen this time? Further observation may be needed.

Investment carries risks; the project is for reference only, and risks are to be borne by yourself.