Metrics Ventures, a secondary fund in the crypto market, released a summary of its September market observations:

1. The overall market was sluggish in September, and many indicators were at their lowest levels of the year. **Bitcoin and Ethereum chip data showed a large loss, chips were thrown out, and contract holdings fell sharply.

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2. MVC buying operation. We made a moderate buying operation in mid-September, buying about 20% of the Ethereum position. The transaction price was around $1,600. This was mainly based on the following positive signals: After three months of volatility, the potential selling pressure was released to a certain extent; market sentiment showed panic, etc.

3. The main contradiction in the market is still the lack of funds, which cannot be solved now.

4. The monthly report "Waiting for the fish to die in the vegetable market" is a metaphor for our current investment strategy. Before determining the trend, we will remain patient and wait for the real configuration point to appear.

This article is a review and commentary by Metrics Ventures on the overall market conditions and trends of the crypto asset market in September.

The title of this monthly report comes from a famous joke. An old lady went to the market to buy fish. She stood by the stall and kept staring at the fish. The vendor was puzzled and asked the old lady which fish she liked and why she didn’t buy it. The old lady said that the same fish, a live fish was 13 yuan and a dead fish was 3 yuan, and she was waiting for it to die - this is similar to the mentality of all secondary investors who hold a lot of coins in the market now. They just sit on the sidelines and observe quietly, waiting for the live fish to die before they rush out to buy the bargains.

Of course, our mentality is similar. The lively token2049 conference in September was especially like a vegetable market. Some of the fish in it had their bellies turned white, and there were still some seemingly fat big and small fish flapping their arms. In fact, everyone knew that they would not be able to jump for much longer.

We made some position building activities in mid-September, mainly buying about 20% of ETH, with an average transaction price of around US$1,600, because the position building signals we had been observing showed some marginal changes in sentiment and chip levels.

From the perspective of chips, we can observe that as the market falls, Bitcoin is hoarded in the chip-intensive area of ​​$29,000-$30,000 and begins to move to the $25,000-$26,000 line, indicating that the locked-in disks that were previously expected to pass the Bitcoin ETF and the XRP/DCG lawsuit are surrendering, cutting their losses and throwing out their chips, and the existing funds on the market provide relatively supportive buying. ETH also has corresponding chip characteristics. At present, the proportion of ETH chips that have realized losses on the chain is close to 50%, which is similar to the characteristics of previous panic bottoms, and also indicates that the bloody chips at the spot level are being thrown out. (Through the observation of on-chain data, we also found that on September 10-11, Arbitrum experienced large-scale whales cutting their losses, with a general loss of 30-40%, which also means that since June, the patience of large investors and whales for the market has finally come to an end.)

From an emotional perspective, market sentiment also quickly turned pessimistic.

From the above chart, we can observe that after nearly 11 months of market adjustment, more than 97.5% of short-term BTC chips are in floating losses. The drop from $30,000 to $25,000 does not seem to be a huge absolute drop, but the pain of selling at a loss is actually very severe. This level of market clearing should be able to bring about a market cooling-off period of about 1 month.

From the data of contract positions, in early September, the BTC contract positions on the Binance platform alone dropped from a peak of $4.81B to $2.88B, a drop of about 40%. In early January 2023, when the market was at its most depressed, this figure was $2.52B, and in March when the US banking crisis hit, this figure was about $2.85B, indicating that the failure of a series of favorable expectations in mid-September did greatly destroy the confidence of players in the market, and had a strong cleansing effect on market leverage. Moreover, throughout September, the OI position of the contract recovered slowly, the fee rate was medium, and it was basically in a depressed mood where no one dared to open long or short positions.

If we look more carefully, we can roughly observe from the hourly market of BTC in the figure below that the narrow range fluctuations in the market in September are really hell mode for contract funds. There are frequent gate-drawing phenomena, and positions are liquidated when the price rises and falls. It is even more pitiful that the price rises first and then falls repeatedly. So it is obvious that the sentiment of Bitcoin at $27,000 is actually more depressed than that at $16,000. The deep bear characteristics are obvious. The whole of September and even October are in the stage of oscillating to digest the selling pressure of locked-in positions.

Not only are the spot and contract sentiments in the market depressed, but even the on-chain Meme market that the industry's extreme left players like to hype has completely cooled down. As shown in the figure below, the ETH network Gas base hit a new low this year. ETH has rarely entered an inflationary state since the completion of Merge. Compared with the freezing point in December 2022, the cold is even worse. From the backtest of the Mempool transaction data we monitor, the activity of tokens without transaction taxes has dropped sharply.

Not only that, in September 2023, DEX transaction volume has not exceeded 30B, which is not as good as 40B in December 2022, and it has recorded a record low in DEX monthly transaction volume since 2021. This is also in line with the market sentiment we intuitively feel. The market heat of BTC at US$27,000 is even lower than that at US$16,000.

When we observed that the market was stuck and the market was cutting, and the mood was extremely depressed, we chose to enter the market to buy lows on a small scale. This does not mean that we believe that the market will have any significant rebound opportunities in the short term, but that the current position has released bloody spot chips (the proportion of chips that have realized losses is high), and the leverage cleaning is relatively thorough (positions are close to the lowest in the year, Long-short ratio is low), sentiment is extremely depressed (volume energy is weaker), the market has given a signal that it is inclined to take over, and it is currently a position with a good risk-return ratio. As a long-term allocation, the price is reasonable, even if short-term appears If there are signs of a possible plunge risk, we can also stop the loss at a price with clear goals and minimal cost.

It so happens that recently there have been some screenshots of the BTC calendar effect circulating widely in the market, which mainly means that the cryptocurrency market has a high probability of performing very well in October every year, and there will be a vigorous Alt Season. The calendar effect is just a metaphysics, and we do not have much optimistic expectations for the market in October.

At present, the market has barely breathed a sigh of relief from the reduction game. The total market value of the top five stablecoins has not dropped significantly in the past month. At most, it can be regarded as an upgrade to a stock game. In this case, the market is still mostly an oversold rebound, with limited room for upside, and the driving force for the rise is also at the spot level. Since all players on the floor generally have low positions, there is some buying power to cover shorts. Through market research, we found that secondary institutions and individual investors with capital of more than 100 million US dollars all choose to carry out small-scale bargain hunting with a fixed investment mentality.

If there really is a so-called alt season, due to weak market liquidity and low market capitalization, some short-covering funds may bring huge gains, but there will also be a large number of altcoins competing for funds, resulting in a very drastic rotation of themes and poor market sustainability. It is estimated that no significant money-making effect will be generated. The value of participating in short-term trading is low, and if you don’t escape fast enough, you will become an unfortunate exit liquidity.

The market has froze, with volatility hitting new lows one after another. The proportion of locked-up long-term chips has slowly increased, and short-term investors have repeatedly chased highs and sold at losses, leaving us in a state of numbness where we can neither go up nor down - the main contradiction in the market is still the lack of funds, and this contradiction cannot be resolved now.

The core constraint of the main contradiction still lies with the Federal Reserve. The Federal Reserve suspended interest rate hikes at its interest rate meeting in September, but the market interpreted this as interest rates will remain high for a long time. During the National Day holiday, it was the critical point for the US government to close the budget resolution for the new fiscal year. U.S. Treasury yields rose back to the 2008 level, U.S. stocks, gold and crude oil plummeted, the U.S. dollar rose, and overseas markets were severely shaken. Signs of liquidity tension have emerged - this is also the main consensus in the current crypto market. Those whale players who have not lost all their money and are staring at the fish pond off the market are generally waiting for the collapse of the U.S. stock market in 2023Q4-2024Q1, using the collapse of the U.S. stock market or the interest rate cut as a signal to confirm that the fish has completely died (the ghost of the memory of 312 is echoing).

We keep paying attention to this, but we still want to emphasize that since 2023, we will not use macro information to guide investment decisions in the crypto market. We are not macro experts. The end of the interest rate hike cycle does not mean the beginning of the interest rate cut cycle. Each interest rate cut is only cut after risks appear. This is not a priori signal; at the end of each interest rate hike cycle, a bubble will burst in a corner of the earth, and this time it may not be the US stock market that will burst; whether it will collapse or not, and when it will collapse; all these things are of little help to our decision to "shuttle or not".

In short, the market is short of money now. We don’t know where the money will come from for a while. What we need to face more is that Bitcoin may fluctuate sideways indefinitely within the 15% fluctuation range. Fish, fish, when will you die?

In summary, the cryptocurrency market is still in a downturn in September, and we remain cautious. Before the market funding situation improves, volatility and shocks may continue. We will continue to pay attention to the fundamentals, make timely allocations, and patiently wait for the real buying point. #DeFiChallenge