Article reprinted from: Phyrex Ni
The price changes in the past two days have left many friends undecided. Many friends even think that the CPI is clearly positive and the non-agricultural data is strong. Why does the entire market fall? This issue has actually been discussed in the past few days, although inflation is now gradually declining. But this is already within the Fed’s expectations. Remember we said that the Fed’s expectation for CPI in 2023 is 3.25%, so the current decline in inflation is not enough to change the Fed’s decision-making. To put it bluntly, if inflation does not If it is lowered to 3.25% before the end of the year, there is a high probability that the Fed will not change its strategy. It is indeed a matter of time before it pauses raising interest rates, but it is still a bit early to cut interest rates.
If the Federal Reserve does not relax monetary policy and continues to maintain high interest rates, it will be very unfavorable for the financing of individuals and enterprises. Therefore, a cooling of the job market is inevitable. Especially from the perspective of the Dow Jones Index, energy, finance, and consumption are all falling. Not to mention finance, although the collapse of the banking industry has slowed down, the problems of regional banks cannot be completely relaxed. The energy situation is even clearer. It is obvious that even OPEC's production cuts can no longer prevent the decline in oil prices. The same is true for consumption. In the context of a trading economic recession, extra consumption has been eliminated from the necessities of life by more consumers. Except for the service industry which remains strong, other industries are also under great pressure for employment. It is very likely that the unemployment rate will rise in recent months. According to the Fed's expectations, it is very likely that the unemployment rate will reach 4% this year.
Another more important issue is the debt default. In the past two days, we have focused on debt default and brought up the S&P's decline in the past five weeks. Although we cannot completely believe that this decline is correct, it does not prevent investors from making more pessimistic expectations. Although many friends believe that debt default is not a problem and will inevitably be settled, this does not mean that it will not have an impact on the market. Coupled with the economic recession and the Fed's lack of clear statements, for many investors, now is the time to hedge, and even short-term US Treasury bonds are no longer a better target. Instead, technology stocks are considered to be defensive assets by the market because it has been confirmed that the Fed's interest rate hikes are coming to an end and interest rates have almost reached a high point. In addition, the revenue in the first quarter is indeed good.
It stands to reason that the cryptocurrency market, which is highly correlated with technology stocks, should rise after technology stocks and Nasdaq futures rise, but the cryptocurrency market and technology stocks are deviating further and further. The reason for the divergence here is most likely the prevalence of Meme coins. We analyzed before when Meme coins just began to become popular that with the spread of the wealth-creating effect, investors' anxiety will inevitably increase, especially for the exchange of losing chips and small profitable chips, which will be regarded as a gaming opportunity to increase profits. For example, if you buy an ETH at $1,800 and it rises to $2,000, it is a 10% return, and even if you buy it at $1,000 and it rises to $2,000, it is only twice the return. This is imaginable for the temptation of Meme coins that have risen hundreds or thousands of times. This is not to mention assets that are still losing money.
Therefore, changing positions becomes the best choice under anxiety. In layman's terms, it means investing one ETH in six projects. As long as one project can increase tenfold, even if the others return to zero, you can still get nearly double the return. Therefore, under this kind of emotion, friends with limited funds will inevitably give up their chips and transfer them to Meme coins. Even now, new projects are born almost every day to make people rich, which increases the gambling nature of investors who have been trapped. The project side of the universal currency issuance may not be large enough to keep the profits obtained in BTC or ETH. Cashing out may be their ultimate goal. This is common in zoos and early NFTs.
Of course, this does not mean that BTC and ETH will definitely be hit hard. After all, technology stocks are still highly correlated with the cryptocurrency market. Just like the Luna and FTX incidents, although the cryptocurrency market has experienced an independent decline, when pessimism and panic are over, it will return to being synchronized with the Nasdaq futures. At this time, the cryptocurrency market will once again enjoy the dividends of macroeconomic sentiment. The current suspension of interest rate hikes and adjustments to the debt ceiling are still positive for boosting market sentiment, and these two positive factors will appear one by one, especially the CPI data for May and June. Because inflation in June last year was 9.1%, the highest in nearly 50 years, the CPI data for June this year will inevitably have a significant decline compared with the same period last year. These are all factors that stimulate positive factors in the risk market.
Looking back at the data of the cryptocurrency market, there have been a lot of bad things recently, especially the increasingly strict regulation of the cryptocurrency market in Europe and the United States, which not only limits the participation of market makers in terms of liquidity, but also hits the determination of many institutions to enter the market emotionally. But even so, futures trading in CME has not yet shifted to a stage of full bearishness. BTC and ETH futures are still slightly ahead of Coinbase's spot prices, with room for positive premiums. This shows that there are still many institutions and professional investors who continue to gamble on the opportunity to rise because they expect the suspension of interest rate hikes and the increase in the debt ceiling in June. However, it can still be found from the exchange rate that more funds are still concentrated in BTC, which is relatively not so friendly to ETH. Further, it may not be good news for ALT. Because Meme itself has dispersed a lot of funds, and more of the remaining funds are still in BTC and ETH, the magnitude of overflow funds will be greatly reduced, and more ALTs will face a shortage of funds. Similarly, the rise of ALT also requires the emotional boost of BTC and ETH to have a chance.
Then, from the data of May delivery options, BTC's biggest pain point has dropped from yesterday's $28,000 to $27,000, but the short-to-long ratio has not changed and remains at 0.38. The nominal funds continue to decline and are currently less than $2 billion. The data of ETH is not so good. Although the biggest pain point is still at $1,800, the short-to-long ratio has also risen from yesterday's 0.42 to 0.44. The bearish or hedge short sentiment has begun to increase, and the nominal funds have risen slightly to $1.15 billion. In addition, the data of the delivery options on the 19th that we paid attention to yesterday also changed significantly. Although BTC's biggest pain point on the 19th was still at $28,000, the short-to-long ratio rose to 0.69, an increase of 0.04 in 24 hours, and the nominal funds were nearly $470 million, an increase of $20 million. Similarly, the data for ETH delivered on the 19th is more pessimistic. The maximum pain point has dropped from $1,900 to $1,850, and the short-to-long ratio has risen from yesterday's 0.82 to 0.91, with nominal funds approaching $200 million. It can be seen that the short-term bearish trend on BTC and ETH is increasing, especially for ETH, the pressure will be greater.
Back to the on-chain data of BTC and ETH, first of all, the on-chain transfer data of BTC from 12:00 noon yesterday to 12:00 noon today. Looking at the green text, we can find that the movement of BTC on the chain has increased significantly within 24 hours. The address change of nearly 167,000 BTC is also rare in the near future. In this case, it is either the wallet of the exchange that is being sorted out, or the turnover rate of investors has increased. Let's wait and see the detailed data step by step. In addition, from the long-term holding data composed of the overall profitable chips below $15,000 and the loss chips above $50,000, it is true that with the increase in the circulation of the overall BTC, the reduction of long-term holdings of BTC has increased. The average reduction per hour has increased to about 130 BTC, which is nearly double the data of normal working days. The reduction of overall loss chips above $31,000 has also increased slightly. The average reduction per hour in the last 24 hours has reached about 151 BTC, which is also more than 50% higher than the data of normal working days.
Although the circulation volume is indeed increasing across the board, the focus of turnover is still on BTC with a cost between $26,500 and $30,000. Especially as the price fluctuates downward, it is obvious that the losing chips have a strong willingness to leave the market, especially the chips with a cost of around $27,000, which provide the largest turnover. From the detailed data, as of 8 o'clock this morning, the overall selling pressure transferred to the exchange, short-term holdings of BTC are indeed still the focus of selling pressure, of which the selling of short-term losing chips accounted for 60.79%, while yesterday this data was only 52.24%, indicating that more losing chips began to cut their losses and leave the market, and investors' sentiment was not very optimistic. The proportion of short-term profit-taking has dropped to 35.24%, and it is obvious that high-priced chips are exchanged for low-priced chips, which lowers the purchase threshold while increasing the possibility of short-term selling.
Judging from the data of URPD, we have been saying that $26,500 is a very important support point recently, especially more chips are now concentrated above $26,500. Although there are selling situations, there is no panic selling pressure. Once it falls below $26,500, there is almost no support before $24,500. The same was true when it rose. It quickly crossed $25,000. Therefore, once it falls below, it is very likely that more chips will panic and leave the market, which will put great pressure on selling. At present, the difficulty of going up is gradually increasing. The reason why many short-term investors do not sell their stocks is to wait for a favorable rebound. Therefore, if there is no significant increase at one time, it may take more time to adjust. Yesterday's analysis also explained that if the S&P 500 can reach 4,800 points according to Wall Street's expectations, BTC has a chance to reach $36,000 and ETH has a chance to reach $2,400. Of course, this is just Wall Street's more optimistic expectation and cannot be used as a basis for purchase.
In addition, judging from the selling pressure of BTC transferred to exchanges, although a large amount of transfer data occurred on the chain, the selling pressure transferred to exchanges has not increased, but is significantly lower than that during the week, and even the lowest point of the selling pressure on working days in the past month. As of 8 o'clock this morning, only more than 15,400 BTC have been transferred to exchanges. Not only has the selling pressure decreased, but the withdrawal data has fallen even more outrageously, with only more than 12,300 BTC leaving the market. This data is already the lowest point on working days in the past six months, and it will even be lower than the data in recent weekends. The result is that both buying sentiment and purchasing power are not optimistic.
Compared with BTC, ETH's data is not so pessimistic. Although the selling pressure transferred to the exchange continues to rise, as of 8 o'clock this morning, more than 264,000 ETH have been transferred to the exchange, but there is still a strong transfer-out data, reaching 343,000. The number of ETH transferred out will be higher, but from the perspective of the amount of funds, more funds are not concentrated on ETH, so it may not be that the purchasing power and purchasing sentiment are higher than BTC. It is very likely that as the price drops, more investors give up short-term games and transfer more chips to the POS mining pool, waiting for the arrival of the big cycle. Therefore, the stock of ETH in the exchange has once again refreshed the lowest value in the past five years. It is very likely to reduce short-term selling pressure.
Therefore, the number of ETH unlocked in the POS mining pool has also steadily decreased. As of 8 a.m. this morning, only 355 new validators were ready to leave the market, which would bring 11,360 ETH into the market. However, the number of new validators pledged to POS has increased to the second highest point in history, with 6,963 new validators, equivalent to 223,008 ETH, joining the ranks of passive lock-ups. This is consistent with the increase in exchange withdrawal data previously determined. So from this perspective, both BTC and ETH are continuing to move towards long-term holding.
Next is the market value and purchasing power of the main stablecoins. From the data as of 8 o'clock this morning, the market value of USDT continued to increase significantly, increasing by more than 130 million US dollars in 24 hours. This also means that the main funds suspected of Europe have not been hindered by the falling prices, but it has not yet been found to be converted into purchasing power. It is very likely that they are funds prepared for bottom-fishing. Compared with USDT, which represents European funds, the market value changes of USDC and BUSD continue to represent the attitude of US dollar funds. The market value of USDC has dropped by more than 60 million US dollars, and the market value of BUSD has also dropped by more than 33 million US dollars. American investors still choose to leave the market. Even if there is a possibility of a suspension of interest rate hikes and the lifting of debt defaults in June, it still cannot stop the risk aversion of US funds. Even the market value of TUSD, which is favored by Binance, has a single-day reduction of 52 million US dollars. The overall market value of the main stablecoins is still on a downward trend.
From the purchasing power data, USDT has slightly increased compared to last week, but the increase is not obvious, and there is still a lack of purchasing power. The data of USDC is even more unbearable. With the gradual exit of US funds, the purchasing power of USDC has been in a clear downward trend in the past two months. Of course, this is also closely related to the supervision of market makers. Although it may not hinder the rise of BTC and ETH prices, it will be very difficult to have a significant increase.
After looking at all the data today, we can know that with the gradual stabilization of the banking industry, BTC and ETH have temporarily lost the dividends of the risk market. The popularity of Meme coins is also one of the reasons that affect price trends after diluting funds. Especially with the decline of the entire market, the myth of Meme coins making people rich has begun to weaken, and naked swimmers have gradually surfaced, which will be a bigger blow to the sentiment of the currency market. However, when the sentiment is adjusted, there are still short-term benefits of lifting the debt ceiling and suspending interest rate hikes. If the currency market can get back in sync with technology stocks, there is still a chance to rise.
