Bitcoin has recently hit record highs one after another. Although it fell briefly, it quickly regained its lost ground. Will the 20~30% correction in BTC that bottom-hunting investors want to see happen again? This article originates from an article written by Tide Capital, organized, compiled and written by PANews.
(Previous summary: Female stock goddess: Bitcoin’s goal of $1 million in 2030 is “too conservative”)
(Background supplement: Wall Street giant admits his mistake? Bill Ackman: Consider buying Bitcoin! The price of the currency may soar to infinite highs)
The incremental funds brought by Bitcoin spot ETFs, the rapid expansion of US debt, and the halving of mining output in April will further exacerbate the situation of Bitcoin being in short supply, which makes the market correction time and magnitude very limited.
Although ETH and most altcoins are still far away from their previous highs, we believe that the positive cycle of OTC funds entering the market has begun. The sharp rise in Meme coins is just the appetizer, and the altcoin season is about to come.
It should be noted that BTC is still under high pressure and contract rates are on the high side, so be wary of the risk of short-term deleveraging.
Spot ETFs are superimposed on the halving cycle, and the BTC long-term bull trend has officially begun.
U.S. stocks, gold, and BTC all hit new highs, and market risk appetite increased
With the dual help of fiscal and economic factors, the S&P 500 index hit a record high in January. Gold and Bitcoin followed closely, hitting record highs in March, and market sentiment was booming.
In September 2023, we published a research report “The Opportunity of Patience and Greed: BTC short-term currency holders are selling their last chips near $26,000.” At that time, market trading was cold and BTC fluctuated and bottomed out, but now the rise is already overwhelming. . In our view, there is no difference between Bitcoin now and then, and the logic of long-term rise remains unchanged.
Judging from the last bull market, the S&P 500 index hit a new high in August 2020, and Bitcoin began to accelerate its rise two months later, almost in line with the rhythm of this bull market. In other words, the surge in the stock market has increased the market’s risk appetite, and OTC funds have accelerated into the cryptocurrency market. We are ushering in the main rise of Bitcoin.
BTC begins to accelerate after S&P 500 hits new highs
Behind the surge in dollar-denominated assets is the rapid expansion of U.S. debt
Since June 2023, the scale of U.S. debt has accelerated, increasing by nearly US$3 trillion in half a year, with the total debt exceeding US$34 trillion. According to calculations by Bank of America analysts, at the current debt growth rate, the US debt will increase by US$1 trillion every 100 days, and the total debt will exceed US$50 trillion in the next 10 years.
There is no upper limit on the growth of legal currency and debt, and the supply of gold and Bitcoin is limited. The rapid expansion of the scale of U.S. debt will undoubtedly push up asset prices. Amid expectations of high growth in U.S. debt, scarce gold and Bitcoin have become popular options for investors.
The size of U.S. government debt has accelerated since June 2023
BTC spot ETF accelerates OTC capital allocation and challenges gold market value
On January 10, the BTC spot ETF was approved, which has since brought in nearly 10 billion US dollars in over-the-counter capital inflows, pushing Bitcoin to continue to rise. In previous bull markets, BTC usually experienced multiple retracements of more than 20%. However, the number of retracements in this bull market is not large and the magnitude of the retracements is not large. This is precisely due to the continuous inflow of OTC funds.
Bitcoin spot ETF has net inflows of nearly US$10 billion
Referring to gold ETFs, after the launch of the first gold ETF, gold ushered in a long bull run of nearly 10 years, with an increase of more than 400%. Compared with gold, BTC storage is safer, transactions are more convenient, transfers are faster, and it has superior value storage characteristics.
The current market value of gold is US$14.5 trillion, while the market value of Bitcoin is only US$1.3 trillion. Bitcoin still has 10 times the distance from gold. The launch of Bitcoin ETF is more popular than the gold ETF of that year, and the speed of capital inflow is far ahead.
Compared with the first gold ETF, the BTC spot ETF’s capital inflow rate is far ahead
The market value of BTC is about to surpass that of silver. It has completed the thousands-year process of silver in just 15 years. The next step will be to challenge the market value and status of gold. Any IP is a high-risk asset. Currently, BTC is in line with the trend of the times. Compared with ancient gold, BTC is more favored by the younger generation. Winning young people means winning the future. When the millennial generation gradually takes the center stage of the times, BTC will also usher in its highlight moment.
Bitcoin halving will further reduce supply, and the market tends to speculate in advance
Bitcoin will complete its fourth halving on April 28, 2024, and the block reward will be reduced from 6.25 Bitcoins to 3.125 Bitcoins, further reducing Bitcoin’s output and selling pressure. According to data compiled by K33 Research on the first three Bitcoin halvings, the average return of Bitcoin in the 50 days before the halving was 30%, and the average return in the 50 days after the halving was 3%.
Bitcoin’s average return in the 50 days before halving was 30%
In this bull market, ETFs have brought a lot of demand to Bitcoin, and the fourth halving will further reduce the supply of Bitcoin, which will exacerbate the situation of Bitcoin being in short supply. There are currently about 50 days until the halving, and there is a high probability that Bitcoin will fluctuate and rise until the halving is completed.
The market has abundant funds, the bull market is starting to cycle, and the copycat season may be coming
The risk-free interest rate exceeds 10%, attracting OTC funds to continue to enter the market.
When the crypto market becomes active and sentiment is hot, the demand for leverage will increase, thereby increasing lending rates. The interest rate on Binance USDT demand deposits has reached 18%, which is much higher than the 5% interest rate on U.S. Treasury bonds, which will also attract over-the-counter funds to enter the market for arbitrage.
Market funds are becoming more and more abundant, and excess liquidity tends to flow into popular sectors. Sectors that continue to rise will attract more funds to enter the market, forming a positive cycle in which bull market funds continue to flow in.
Binance USDT demand deposit interest rate reaches 18%
As a result, market demand for stablecoins continues to increase. USDT has continued to be issued since October 2023, and its market value has exceeded US$100 billion. With the continued inflow of OTC funds, the current bull market will rise longer and with greater amplitude.
The market value of USDT has exceeded 100 billion US dollars
Retail investors are entering the market, but there is no sign of a top yet
After Bitcoin strongly exceeded $60,000, market sentiment was high and Meme coins began to rise sharply. New Meme coins such as PEPE and WIF have increased tenfold, while old Meme coins such as SHIB and DOGE have also performed impressively. News headlines about the skyrocketing cryptocurrency prices and various stories of retail investors getting rich are widely spread on social media, attracting more retail investors to enter the market.
Meme currency rose sharply, attracting retail investors to enter the market
Large gains in Meme coins in the past have usually signaled the end of a bull market, however, it may be too early to talk about a top. Judging from Google search trends, searches for the keyword “Crypto” have been rising since the second half of last year, and have accelerated this year, but the extent has only reached half of the peak of the last bull market.
In other words, retail investors are entering the market, but there is no sign of a top yet.
The Google search index for “Crypto” reaches half of the previous bull market
Meme is just the appetizer, and ETH’s strength indicates that the copycat season is coming
Although Meme coins have performed well, most altcoins still underperformed BTC in price growth, and there has not yet been a comprehensive bull market for altcoins. However, the rise of Meme coins has opened up the market’s imagination. At the same time, the altcoin king ETH has begun to strengthen, and the ETHBTC exchange rate has rebounded from lows, which may indicate that a broader altcoin season is coming.
ETHBTC exchange rate rebounds from lows
Since the Shanghai upgrade last year, the amount of ETH pledged has continued to rise. The number of pledged ETH currently exceeds 30 million, which means more than 26% of ETH is locked, which has greatly reduced the supply of ETH.
At the same time, the activity on the Ethereum chain increases Gas Fee and accelerates the burning of ETH. According to the calculation of the speed in the past 7 days, 260,000 ETH will be burned every year, which means that the total amount will decrease by 1.4%, which will make ETH more scarce.
In addition, Eigenlayer TVL, a popular re-pledge project this year, exceeded US$10 billion, which also brought a large amount of pledged locks to ETH.
Re-pledge project Eigenlayer TVL exceeds $10 billion
After the BTC spot ETF was approved, giants such as BlackRock have begun to prepare the application for the ETH spot ETF, which will be approved as soon as May this year. This will make the market turn its attention to ETH and other altcoins. We will see More copycat craze.
Risk warning: Be wary of overheated short-term sentiment and market deleveraging
BTC is overbought in the short term, and the previous high pressure is still there
BTC’s rise is astonishing. Including March, it has achieved 7 consecutive monthly positives, which is very rare in history. Even in the big bull market of 2020-2021, BTC only had 6 consecutive monthly positives. It is obvious that BTC has become overbought in the short term.
In addition, BTC hit a historical high and then retreated, triggering a sharp decline in the market. US$69,000 has become a strong pressure level. Bulls need time to regroup, and BTC may fluctuate below 69,000 for a period of time, completing consolidation and changing hands before breaking through.
BTC monthly line has 7 consecutive positives
Contract rates are on the high side, be wary of deleveraging risks
Since late February, contract fees have increased significantly, reaching their peak in early March, with annualized fees for almost all altcoins exceeding 100%, which means that the market’s leverage has increased significantly. After a sharp pullback on March 6, contract rates decreased, but then began to rise again.
It can be seen from the heat map of contract rates that the market is showing signs of regional overheating. Although there are no signs of a top yet, the high contract rates will still weaken the power of bulls, and we need to be alert to the risk of the next deleveraging.
The market is showing signs of regional overheating
Conclusion
The long bull run of BTC has begun, funds continue to enter the cryptocurrency market, and more copycat crazes are coming.
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2024-03-11 03:02:54
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