June 12, Beijing time, is called "Super Wednesday" by the financial market because two "blockbuster" will be released tonight and tomorrow morning: the latest CPI data and the Federal Reserve's interest rate decision. The relevant data may become the weather vane of the next wave of trends in the crypto market.
Crypto market volatility intensifies, Bitcoin and Altcoin fall together, triggering $250 million in liquidations
Perhaps due to the increasing uncertainty about the future market trend, the cryptocurrency market experienced significant fluctuations before "Super Wednesday". Although Bitcoin opened at nearly $70,000 yesterday, it failed to hold the resistance level and fell to the $66,000 range, even hitting a nearly three-week low of $66,170 on Tuesday night.
According to Coingecko data, although Bitcoin rebounded to around $67,000 at the time of writing, it is still down 1.1% in the past 24 hours. Compared with Bitcoin, Altcoin have experienced a larger correction, with the Coindesk 20 index falling by more than 6%. The prices of the 20 cryptocurrencies included in the index fell across the board, with Ethereum falling below $3,500 (down 6.5%), and Solana (SOL), Dogecoin (DOGE), Cardano (ADA), and Chainlink (LINK) falling by about 6-9%.
Obviously, the sudden pullback in the cryptocurrency market caught investors off guard. When traders fail to meet margin requirements or do not have sufficient funds to maintain their positions, it will lead to partial or total loss of traders' initial funds or "margin", which will trigger liquidation when the exchange closes the leveraged position. According to Coinglass data, this morning, leveraged derivative trading positions of crypto assets across the entire network were liquidated for more than $250 million, and the main explosion was long orders. This is the second large-scale leverage surge in a week after the liquidation of $400 million last Friday. At present, the amount of liquidation in the entire crypto market has narrowed slightly to $219 million.
Industry analysis: Although the macroeconomic situation is chaotic, the volatility of the crypto market has decreased and may rise in the future
In view of the current macroeconomic situation, the cryptocurrency industry does not seem to be overly pessimistic. Overall, although the market is slightly chaotic, some fundamental indicators are still performing well, such as:
1. In terms of on-chain data, Ethereum’s user base is still growing, and the number of active addresses and new addresses have reached historically high levels, which may indicate the long-term health and growth potential of the network;
2. In terms of on-site funds, the holdings of stablecoins as safe-haven currencies in exchanges have dropped significantly, which may mean that market confidence has recovered and investors may reinvest funds in riskier assets to seek higher returns rather than wait and see;
3. In terms of macroeconomics, the personal consumption expenditure (PCE) index released on May 31 was 2.8%, similar to the consumer price index (CPI). It is expected that this data has been digested by the market and is unlikely to change the Fed's current wait-and-see attitude. As long as the interest rate cut is not imminent, the market has enough motivation to rise, and it is expected that the market will maintain its expectations for high interest rates before inflation data improves.
In addition, some institutional investors are also optimistic that the crypto market will continue to maintain its upward trend in the future.
QCP Capital, a Singapore-based crypto investment firm, believes that despite the short-term market pressure and risk aversion, it is still a good opportunity to accumulate cryptocurrencies. Positive events include the launch of the spot Ethereum ETF and the verbal battle between Biden and Trump to win over crypto voters. The recent decline in the cryptocurrency market is mainly caused by the following factors:
1. US non-farm payrolls data exceeded expectations, US Treasury yields rose, and expectations of interest rate cuts in July and September were ruled out;
2. French President Macron called for a surprise election, and the euro fell sharply against the US dollar, pushing the US dollar stronger and triggering risk aversion;
3. The market remains cautious ahead of the Consumer Price Index (CPI) and the Federal Open Market Committee (FOMC) meeting;
4. Bitcoin ETF saw outflows of $64 million on Monday, possibly as traders reduced risk ahead of important events.
Another research institution, K33 Research, also pointed out in its market analysis report on Tuesday that Bitcoin may experience frequent fluctuations in the near future because the crypto market is "highly sensitive" to recent economic data and "highly correlated" with U.S. stocks. Its research data shows that offshore traders who have been bullish in the past two weeks are currently losing money on their Bitcoin positions, exposing the market to potential long squeeze risks. At the same time, after the end of the record 19-day net inflow record for U.S. spot Bitcoin ETFs, the correlation between Bitcoin and the U.S. stock market has reached its highest level in 18 months. Last week, the 30-day correlation coefficient between Bitcoin and Nasdaq increased to 0.64 for the first time since 2022.
Is the crypto market in the “preparation stage” for the next bull run?
At this stage, the cryptocurrency market's expectations for the future are mainly affected by changes in monetary policy, and the market seems to be in the preparation stage for the next bull market. Zhou Lele, deputy chief operating officer of Shengli Securities, said that as prices rise, the inflow of over-the-counter capital (ETF) and the stable holding strategy on the market may be resonating, which will become a key factor in the upward trend of Bitcoin prices and the recovery of volatility. The core concerns of the future market include:
1. When will the Federal Reserve start cutting interest rates, and the difference in expectations about the timing of the rate cut due to the 300,000 non-farm unemployment figures.
2. After the Ethereum ETF was approved, the old Defi projects revived and the market's overly pessimistic expectations for the Ethereum ETF.
3. The shift in sentiment regarding Bitcoin ETF inflows and the expected gap between the fundamentals of the virtual asset market.
4. The expectation gap between macroeconomic trends and actual market reactions.
Overall, the correction in the cryptocurrency market this week did not affect the overall positive trend of the market. Some market observers pointed out that some positive signs during the sell-off may indicate a rapid economic recovery. In fact, Fed Chairman Powell revealed at the Stanford Business School Forum two months ago that most FOMC members believed that it would be appropriate to lower the policy interest rate at some point this year. For this reason, the Fed still needs greater confidence to ensure that inflation can be sustainably reduced to the target level of 2%. There are risks in cutting interest rates too early or too late. It is too early to judge whether the recent inflation data is just a temporary fluctuation.
On the other hand, as other countries around the world continue to cut interest rates, it will be difficult for the United States to ignore this, and Bitcoin seems to be digesting the impact of the Fed's rate cut step by step. Anonymous cryptocurrency analyst Gumshoe pointed out in a post on the X platform that Bitcoin had pulled back several times before this year's FOMC meeting. As shown in the figure below, Bitcoin's pullbacks during the four meetings this year reached 10%, 11%, 10% and 4% respectively, but soon reversed the trend shortly afterwards.
As QCP Capital wrote in its report: This decline is a good opportunity to buy on the dip.
