The cryptocurrency market has performed stably despite the plunge in US stocks and the AI sector. Bitcoin has regained US$64,000, while Ethereum has rebounded to the US$3,000 range. The performance is in line with our expectations, verifying that Bitcoin still has its avoidance in regional war conflicts. In addition, Bitcoin is also facing a halving. Although many analysts have pointed out that the halving may cause the price of Bitcoin to fall, we maintain our original view that Bitcoin is expected to rebound due to rising risk aversion.
There were two major events in the global risk asset market last week. The first was that inflationary pressure in the United States still existed and was not as optimistic as previously expected, causing the U.S. Federal Reserve (Fed) to revise its previous interest rate expectations, surpassing three Feds. Officials have also come forward to say that this year's interest rate cut may be delayed or even until next year, but the investment market is still slowly revising interest rate expectations. According to Fed Watch interest rate futures, the current market expectation is to postpone the interest rate cut by one yard to the third quarter of this year.
However, the forecasts issued by Federal Reserve officials are more pessimistic. They generally believe that it may be as soon as December this year, or must wait until next year. The market is also quite hesitant about this, with only a small increase in bond yields, which makes There have been some more negative changes in the cryptocurrency market, but the market sentiment is no longer good. Investors have withdrawn some funds after seeing the change in official attitudes. Bitcoin fell during this period when it fell to $61,000, but the selling force was not very strong. , the decline is still caused by the high contract leverage.
Considering that cryptocurrencies have previously surged due to the continuous influx of buying orders from Bitcoin ETFs, many investors have chosen to use dozens of times contract leverage in order to maximize returns, especially small and medium-sized cryptocurrencies, such as memes. Coins provide leverage of more than 20 times. Although traders have restrained a lot, five times leverage is a strategy adopted by most retail investors. However, when meme coins fall by more than 20%, a five-fold increase can easily lead to forced liquidation.
Therefore, this wave of decline was divided into two. The first time was that Meme Coin fell due to the impact of the overall market. Due to the high volatility of Meme Coin, it often fell by more than 20%, causing huge contracts to be liquidated, triggering the first wave of retracements. , the second wave was when Bitcoin once fell below 60,000 US dollars. This is a more obvious phenomenon of contract liquidation in mainstream currencies with generally low leverage and volatility. The conflict between Israel and Iran stabilized the price of Bitcoin. event.
Sources: MICA RESEARCH A. April 16 U.S. retail sales data in March were unexpectedly strong, dampening expectations of interest rate cuts
The United States released the latest retail sales data for March, which showed a monthly growth rate of 0.7%, exceeding expectations of 0.4%. Core sales increased by 1.1% monthly, far exceeding expectations of 0.5%, showing that Americans' spending power is still very strong. It will become increasingly difficult for the Fed to cut interest rates in the short term.
This means that even if the United States is in a state of high interest rates, the consumption power of the American people will continue to delay the slowdown in inflation. As soon as this data was released, it immediately impacted U.S. stock yields and bond prices. Ten-year bond yields Interest rates have reached 4.6%, and U.S. stocks have also fallen.
Due to the heightened expectations of a delay in interest rate cuts, both gold and Bitcoin prices have experienced significant retracements. Although we have previously mentioned that Bitcoin and gold are affected by risk aversion and will not be affected by the Fed's interest rate policy in the short term, Yesterday's data was so different from market expectations that it still impacted asset prices. Bitcoin has temporarily fallen from $66,000 to $63,000, a drop of about 5%.
B. On April 17, Bitcoin once fell below US$60,000, triggering a forced liquidation of US$216 million.
As the market sharply adjusted its expectations for the U.S. Federal Reserve's interest rate policy, the price of risk assets was also affected by market selling pressure. The price of Bitcoin fell below $60,000 yesterday and then slowly rose to $61,000. According to Coinglass data, this resulted in More than US$216 million was forced to liquidate within 24 hours, but the current market leverage is still high.
Many people blame the Iran-Israel conflict for the reason for the decline, but we think it is good news that there is no further conflict between the two countries. In addition, the hedging attribute of Bitcoin’s war has not disappeared, and the adjustment of interest rate policy should have a greater impact. factor.
On the other hand, most of the contract leverage that was cleared in the last wave were small and medium-sized cryptocurrencies. Their declines were even more dramatic in the previous wave, reaching more than 20%. All positions with leverage of five times or above would be liquidated, but the fluctuations of Bitcoin were not that big. , only about 10%, so there are still high open positions in the market. Investors love to obtain greater returns through leverage. The recent large fluctuations in Bitcoin are caused by the consolidation of leverage contracts.
C. April 19 Fed official: Unless inflation is confident of falling, interest rates can be cut until 2025
Early this morning, three Fed officials expressed their views on inflation. Almost all of their comments were hawkish. For example, New York Fed President John Williams said that inflation is still higher than the target and may even consider raising interest rates if necessary. Atlanta Fed President Bank President Raphael Bostic also remains open to raising interest rates, believing that if inflation data worsens further, the Fed will need to consider countermeasures.
Finally, Minneapolis Fed President Neel Kashkari mentioned in the interview that unless the Fed is confident that inflation will come down, it will not cut interest rates this year and will have to wait until 2025. These three The official's remarks further increased U.S. bond yields and impacted the rise of U.S. stocks. Fortunately, they did not suppress the rebound in the crypto market. The closing of short contracts helped Bitcoin regain the $63,000 level, an increase of about 3%.
The crypto industry is already counting down to the Bitcoin halving event. With less than 200 blocks left to be mined, Bitcoin will be halved. Originally, the market expected that industry players would hype up the price of cryptocurrencies, but this has not yet happened. Fund operators have begun to speculate on this topic, and more resources or investors' attention may be diverted to the Fed's interest rate policy shift.
Risk aversion offsets interest rate reversal pressure, Bitcoin price is supported
Let’s talk about the further escalation of the conflict between Israel and Iran in the Middle East. When Iran retaliated against Israel, Bitcoin fell significantly along with the U.S. stock market. At this time, many people thought that Bitcoin’s safe haven had disappeared, and even began to question whether Bitcoin was It is a safe-haven asset because the two happened on the same day. Many meme currency traders suffered heavy losses on that day and believed that Bitcoin is no longer a safe-haven asset. However, the subsequent events completely disappointed analysts' views.
Later, when the news came out that Israel planned to turn back and fight back against Iran, the price of Bitcoin rose from another US$61,000 to US$64,000, and once reached a maximum of US$65,000. In comparison, US technology stocks were in dismal condition, and AI concept stocks were even more affected by the US dollar. Super Micro (SMCI) has plummeted due to the fact that it did not announce its results in advance. The price performance of Bitcoin can be said to be quite strong. Compared with technology stocks, Bitcoin is currently more like a digital gold asset. If gold rises, Bitcoin will easily rise. The current market The risk aversion sentiment is strong.
Therefore, the last wave of Bitcoin's collapse was not due to the conflict between Israel and the Middle East. The bigger factors were the U.S. Federal Reserve's interest rate policy shift and the still high leverage of crypto market contracts. Traders must wait for the market leverage contracts to be sorted out before they can trade. It may be the direction of the next wave. If we return to its essence, Bitcoin is still a safe-haven asset and can provide a value storage tool under regional conflicts. However, it is not a hedge against the risk of stock decline. It is a "regional war hedging tool."
At the same time, more and more analysts are pointing out that the Bitcoin halving may lead to a sharp drop in prices. The reason is that the income of miners has dropped sharply, resulting in some mines with undisciplined operations needing to sell off inventory first to cover previous investments or Operating expenses, but our idea is a little different. Fund companies are expected to celebrate the Bitcoin halving. With the supply reduced and the demand for safe havens increasing, the probability of the price continuing to rebound should be higher.
The current trend of Bitcoin is following that of gold. The hedging nature of geopolitical conflicts is also quite obvious. In the short term, the uncertainty of conflicts in the Middle East is increasing. We think this may bring some buying support to Bitcoin. With strong strength, the probability of price consolidation is high. After expectations of subsequent interest rate cuts subside, Bitcoin is expected to challenge the $70,000 mark again.
Review of last week [MICA RESEARCH] Global central banks and investors embrace gold, and Bitcoin is also popular
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〈[MICA RESEARCH] The geopolitical conflict between Iran and Israel intensifies, and Bitcoin risk aversion increases〉 This article was first published on "Block Guest".
