The sharp shock of Bitcoin caused by the non-agricultural data indicates that the market has not entered an early bull market, and it is unlikely to enter a deep bear market. Hongshen and Migou are talking nonsense!
The next three months will be a wide-ranging monkey market, so hurry up and build a position at this point!
Recently, a hot topic on Twitter has been triggered: Is the bull market coming? Before that, many people who were ready were eagerly looking forward to the arrival of the deep bear market. Who is right and who is wrong?
My latest opinion: The market is neither in the early stages of a bull market nor in a deep bear market. It is very likely to enter a monkey market with wide fluctuations. At this point, you should hurry up and build a position.
Let’s start by explaining my point of view based on yesterday’s market conditions.
1. BTC long and short double kills, the damn dog dealer harms others without benefiting itself?
Last night, the Bitcoin market was very exciting, first showing a waterfall decline, and then a violent rebound! In just two hours, the range was 2,000 US dollars.
Originally, this violent decline, coupled with extremely negative news, indicated the end of the rebound. Many people chose to short sell. As a result, it quickly rebounded at the previous low support level of US$27,180. The severity of the rebound caused many retail investors to hastily buy long orders at high levels, and the market fell again in the early morning.
The losses from this up and down manipulation were so heavy that everyone couldn't help but curse the dog dealer.
But for mature traders, although it is normal to be frustrated by losses, they should never be angry for no reason and take their anger out on the market. Let’s take a look at the underlying logic.
2. BTC's rise and fall are highly correlated with the US stock market again. Non-agricultural data triggered changes in expectations of interest rate hikes and dominated the market.
For several months, the correlation between the crypto market and the US stock market has been almost zero. From the high correlation in the red box to the inverse correlation in the green box, it can be seen that Wall Street funds are moving away from the cryptocurrency market. In the boring bear market, the cryptocurrency market is becoming an independent market.
But last night the two were highly resonant. The S&P 500 first opened with a gap, falling 1%, and then, like Bitcoin, it rebounded rapidly during the session, closing up 1.18%.
Both of them cleverly achieved a rapid rebound at the technical support level. In terms of technical indicators, Bitcoin encountered the previous support and resistance exchange position of around US$27,200, while the S&P also encountered support from the 200-day moving average.
Then the non-agricultural data will be used to support the technical aspects.
The published value is 33.6, twice the expected value of 17, which is off the charts. Therefore, in the past few months, let alone the relationship between digital currency and the US stock market, even the CPI data and interest rate hike data are just a pretense, and the skin is thick and the flesh is thick, and it goes as it should.
But when macro data explodes, all risk markets unite.
why?
Maybe many of you cannot understand how non-agricultural data affects the cryptocurrency market. Here is a picture to explain it.
The key here is that a good employment situation will lead to high costs for enterprises. At the same time, because the market conditions for enterprises are relatively good, they are willing to pay more for labor costs. The two are mutually causal.
In this case, there should be a sharp drop!
Yes, there was indeed a sharp drop at 8:30 last night, and expectations for a November rate hike suddenly increased from 28% to 32%.
But why did it rise again later?
Because this factor showed up in the report: Slowing wage growth.
In other words, a good employment situation means that not only are there a large number of people, but the wages are also good. The current situation is that although the number of people has skyrocketed, wages have begun to slow down, so the labor cost may not have increased.
So today, expectations for a rate hike in November have dropped by one point to 27% compared to before the data was released yesterday.
Therefore, the short-term expected data is not sustainable. We still need to have determination and see the overall situation clearly.
3. See the situation clearly. Without a bull market, there will be no deep bear market.
So does the macro environment tell us that there is any major negative news? No!
Is there any good news? No!
The whole environment is a little empty, that is, the US inflation cannot have a soft landing and is still likely to fall into recession. This is the most frustrating for the currency circle. A soft landing can lead to a rapid interest rate cut cycle, which is a good thing. A great depression rather than a recession can allow the Federal Reserve to quickly save the economy, which is also a good thing.
The environment of the cryptocurrency circle itself is also slightly bearish, but not very strong. The negative factor is that the industry's new technological exploration has stagnated slightly because the venture capital money for 18 months is almost spent, and the positive impact of ETFs will be postponed to next year, but there is no big negative impact. The negative impact of Mentougou has also been postponed to 2024. The bubbles that should be squeezed have been squeezed, and those that should go bankrupt have been arrested. Now there seems to be no sign of a big black swan in the cryptocurrency circle itself.
Only based on the macro environment can we come to the conclusion that there will neither be a bull market nor a deep bear market.
Back to the beginning, Hongshen said that the bull market is just beginning, which can trigger controversy. On the one hand, it shows that there are differences in the market and retail investors have expectations for market changes. Hongshen began to enjoy the fact that even a fart from a big V smells good, but he did not explain why he got the bonus of farting.
If you are a beginner, you should at least see the following three characteristics:
1) The United States has clearly declared an end to its fight against inflation, which is a necessary source of vitality for the cryptocurrency industry;
2) Technical indicators show a large-cycle bottom divergence, usually accompanied by a spike in prices;
3) Miners begin to enter the coin hoarding cycle, and the supply of stablecoins begins to maintain a growth curve of more than 2 months. The number of WBTC and DAI slowly begins to climb. The number of bitcoins held by short-term holders will drop from the current 2.38 million to at least 2.16 million.
The above three indicators have not appeared yet!
There is no need to elaborate on the first and second characteristics. For on-chain indicators, you are welcome to read my "On-Chain Indicator Series". I will talk about the last indicator.
First of all, we see that the short-term holder indicator has been declining. Because of the inherent law - the Matthew effect, high-quality wealth will flow more and more to a few large households. On the other hand, if we want to maintain a certain period of bull and bear markets, we may need to reduce the circulation volume to facilitate market control and pull-up.
I used technical analysis to draw lines for the last two bull and bear markets for short-term holdings, and actually discovered a downward channel. To be precise, it should be a descending wedge. In any case, the proportion of Bitcoin held by retail investors will drop at the speed of light!
Of course, this data is not intuitive enough. I made a table. From the changes in the number of short-term holders before the three bull markets in 2012, 2016, and 2020, we can see the following:
Last bull market
This round of bull market
Decline
3.92 million copies
3.6 million copies
8.8%
3.6 million copies
3.03 million copies
18.8%
3.03 million copies
？
？
What is uncertain now is how much the current round of decline will be? If we follow the mechanical law of a decline from 8.8% to 18.8%, the current round of decline should be 40%. Then before this round of bull market, the number of short-term holders of Bitcoin should have dropped to 2.16 million. However, since this is not a real law, I think it should be around 2 million, which means the beginning of the bull market.
It is probably difficult to enter a long-term deep bear market, and the following events must occur at the same time:
1) The Federal Reserve decides to continue raising interest rates, or not to cut interest rates, and the U.S. economy enters a long-term recession;
2) There are still unpredictable black swans in the cryptocurrency circle: the collapse of large crypto institutions, the US government’s renewed strong attack, a major crisis in the Ethereum ecosystem, and the occurrence of financial system risks like CRV;
3) There is still a long time before the Bitcoin halving cycle, and there will be no major positive news in about half a year;
4) Long-term holders account for less than 80% of the chips.
At present, none of the above four are quite satisfactory.
4. The next three months will be a monkey market. Lack of liquidity will lead to sharp rises and falls. Make good stop-loss and long and short positions. By the way, complete 40% of the position building
So, since it is neither a bull market nor a bear market, it can only be a monkey market. At the beginning of the year, everyone was saying that 2023 would be a monkey market. Everyone was gearing up to go long and short to increase their capital before the bull market came. However, the market rose for one or two days and then fell back for several weeks. It was very difficult to do.
Now, the Monkey Market should have truly arrived.
Friends who are familiar with the "On-Chain Indicator Series" should remember that I have repeatedly said that liquidity is scarce now. Long-term holders are unwilling to easily absorb shares, nor will they dump their shares. Therefore, a little bit of funds can cause a dramatic shock to the market.
We can clearly see, from another perspective, from February 2023 to now, it has actually been fluctuating in a wide range of 24,800-31,800 US dollars, and 2.48 is the key support and resistance swap. It has been a volatile market for as long as 8 months. We are talking about the bull market one moment and saying it will fall below 20,000 the next, but it has never happened.
Nearly two weeks ago, I said in my market analysis that if the price did not fall below 25,000 US dollars in two weeks, then we would be bullish. Now, not only has it not fallen below 25,000 US dollars, it has also rebounded to around 28,000 US dollars.
I'm afraid we need to change our perspective as a whole. 2023 is the year of the Monkey, and it will be more obvious in the next three months because there will be fewer circulating stocks. In this case, we can take advantage of both long and short positions and build a position for the bull market.
How to eat both long and short positions?
This range is divided into two parts, the upper and lower parts. Now the price is exactly around the middle, so opening a short position near 28,500 US dollars is considered shorting at the upper edge of the lower range, and then going long near 25,000 US dollars. If it breaks through 28,500 US dollars and stabilizes, 28,500 US dollars will become the lower edge of the upper range, and you can profit from both long and short positions again.
Please remember, no matter you take half of the range or the whole range, there will be at least one wrong order, so you must set a good stop loss!
Do you also need to build a position at the same time?
Because if it is difficult to maintain a long-term deep bear market, it will be only half a year before the halving next year, and the number of short-term holders will be reduced to 2 million, or only 380,000, and the number of coins will be getting smaller and smaller.
If $25,000 is a relatively iron bottom and is repeatedly verified not to fall below it, we have to consider $24,800-31,800, which is an upward relay in the bull market.
Each time you go long with $25,000, in addition to the contract, it is best to hold some spot goods, gradually reaching 40% of the position. From a long-term perspective, this can prevent you from missing out.
Thank God, there is a high probability that it can return to 25,000 US dollars, giving us the opportunity to build a position. As for whether there will be a God-given opportunity to return to around 20,000 US dollars, I don’t know, but just keep some bullets.
As for the pure nonsense like "Migou" on Twitter, it is bound to reach 8,000 US dollars. It is pure bullshit, just laugh it off.
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