Today's overall market score: 40 points
Why have all altcoins plummeted recently? What is the logic behind it?
Let's explain it in detail. In fact, as early as the recent rise, we can divide the rise into two periods. The first stage is that the Federal Reserve ended the first phase of interest rate hikes, turning from a rapid and substantial increase (50 or 75 basis points) to a slow 25 basis point rate hike. The market believes that this is the Fed's consideration of pausing interest rate hikes or reaching the mid-range interest rate. This period is roughly from January to early March, and the entire risk market is rising, including altcoins.
The essence of this period is a rebound in sentiment suppressed by the Federal Reserve. Not only is the currency market rising, but the entire risk market is also rising. Rising prices will inevitably bring more funds, because risk markets are all expectation-oriented. But this first stage is basically over here.
The second phase was the collapse of Silicon Valley Bank, and the entire risk market was in trouble. At this time, the financial reports of technology stocks had not yet come out. Although AI was very popular, it had not yet become a defensive asset. In fact, because of the collapse of Silicon Valley Bank, technology stocks fell sharply. I remember very clearly that I wrote an analysis at the time, saying that if the US government did not provide assistance, many startups and venture capital companies in Silicon Valley might go bankrupt.
At this time, due to the distrust of centralized banks, the search volume for Bitcoin increased significantly, especially when First Republic was acquired, it reached its peak. As long as the banking industry falls, Bitcoin and Ethereum will inevitably rise, which is the macro dividend. Because of the distrust of centralization and the lack of better investment targets, even when the recession hype was the worst, gold and Bitcoin became the best investment products.
The foreshadowing of the altcoin crash started from here. Starting from April, Bitcoin broke through $31,000 and Ethereum was also hovering around $2,000. But this is because more traditional funds entered, and most of them invested in Bitcoin, only a small number of users invested in Ethereum, and even fewer in altcoins. However, friends in the currency circle completely ignored the impact of this special situation, and instead believed that this was the beginning of a bull market, and that the rise of Bitcoin and Ethereum would inevitably be followed by the rise of altcoins. So there are shouting orders every day. But in fact, there is no new money entering the altcoin market in the currency market.
Especially the CFTC’s lawsuit against Binance. This lawsuit does not seem to have a direct impact on Binance, but it is a huge blow to market makers. Since the CFTC’s lawsuit, the liquidity of the entire cryptocurrency market has dropped significantly, and US dollar funds have begun to leave the market at an accelerated rate. This is barely enough for Bitcoin and Ethereum, after all, a small amount of funds are still concentrated in these two assets, but the departure of market makers has made the liquidity of altcoins even worse.
People who bought altcoins before were waiting for a general rise in altcoins, but without money, how could a general rise come about? Everyone thought it was a small bull market. They said it so many times that they believed it, so they bought the bottom. But when Bitcoin fell, especially when it fell below $26,000, the bottom that everyone thought was very solid was gone. Especially on weekends when liquidity is even worse. The result is bound to be panic selling. There was not much money to begin with, and the selling pressure increased but was not strong enough. In addition, the market began to call for a bear market, so everyone cut their losses.
As for Bitcoin and Ethereum, although they are also falling, many investors are holding for the long term, and even intend to gamble on the big cycle of Bitcoin halving. Therefore, the urgency to sell is not that strong, so the decline is naturally less. With less decline, more altcoins will switch to Bitcoin and Ethereum. This is the result.
In short, there is no new money in the market, and recent transactions are just old money circulating.
Well, that’s all for today’s sharing. If you are interested, you are welcome to have in-depth exchanges and prepare together for the upcoming bull market in 2024. It doesn’t matter if you miss the first few rounds, as long as you catch the later ones, you can still achieve cross-class integration!
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