Dehydrated poster: How low will BTC fall in extreme cases?

Highlights of this issue :

1. Will ETH/BTC continue to fall for another year?

2. Crypto pricing power falls into the hands of Wall Street

1. Murphy (@Murphychen888): How low could BTC fall in extreme cases?

The overall logic is to evaluate from two aspects based on on-chain behavior analysis and historical data.

Method 1: From the perspective of STH-MVRV (short-term holders)

Short-term holders are important participants in the transition from bull to bear, so the performance of STH-MVRV is of great reference value in the bull market cycle. I have used two tweets to explain its principles and functions in detail. New friends can refer to the following link, so I will not repeat it here.

As we all know, there were two terrifying black swan events in the last cycle, which also triggered a sharp drop in the price of #BTC. From the figure below, we can see that when the March 12 incident occurred, STH-MVRV was as low as 0.59; when the May 19 incident occurred, STH-MVRV was as low as 0.67. This means that on March 12, STH (short-term holders) had an average floating loss of 41%, and on May 19, STH (short-term holders) had an average floating loss of 33%. It can be seen how tragic the market was at that time.

There have also been three impressive market capitulation events in this cycle:

1. On March 10, 2023, Silicon Valley Bank collapsed, and the price of BTC fell from $25,000 to $20,000. During this period, STH-MVRV dropped to a minimum of 1.02;

2. On June 5, 2023, Binance was sued by the SEC. The price of BTC fell from US$30,000 to US$25,000. During this period, STH-MVRV dropped to a low of 0.95.

3. On August 17, 2023, it was reported that SpaceX sold $373 million worth of BTC, triggering long leverage liquidation, during which STH-MVRV dropped to a low of 0.91;

The STH-MVRV values ​​under these special events correspond to the current BTC prices as follows:

STH-MVRV 0.59 = $37,979

STH-MVRV 0.67 = $43,129

STH-MVRV 1.02 = $65,659

STH-MVRV 0.95 = $61,153

STH-MVRV 0.91 = $58,579

I wonder if you have noticed that when the market moves out of the bear market bottom range, we can use the performance of STH-MVRV to evaluate the volatility of market sentiment. The depth of the STH-MVRV retracement also reflects the magnitude of the impact of the event that caused the BTC price to fall.

For example, the COVID-19 pandemic in 2020 swept the world, which was a severe test for human life and health. In the face of the survival crisis, no one could think about anything other than life, including investment. The impact of the 3.12 incident on the risk market was equivalent to a magnitude 9 earthquake. I think that in this round of bull market cycle, based on the current situation that can be predicted, the probability of a black swan event of the same level (affecting human survival) occurring again is almost zero. Therefore, it can be inferred that STH-MVRV will not reach 0.59, that is, the price of BTC will not reach $37,979 (can be ignored);

The cause of the 5.19 incident was a panic caused by the Chinese government's withdrawal of mining companies. Although it was also a black swan, it was not to the extent of "life-threatening". Therefore, STH-MVRV reached a minimum of 0.67, which was significantly better than the situation at 3.12. Therefore, I think that if the risk market shock caused by the US economic recession is similar to the level of 5.19, its maximum extent will be similar to that of 5.19. If this is used as a metric, the limit of BTC price retracement in this bull market cycle is around $43,129.

The current market's expectation of the Fed's postponement of interest rate cuts and the possibility of only one rate cut this year should have a similar impact on the crypto market as the "Silicon Valley Bank crash" and "Binance FUD". Therefore, I still maintain the view in the previous Twitter threads that BTC is more likely to make a wide range of adjustments in the C1 and C2 ranges (i.e., $60,000-64,000 and $66,000-70,000).

As of June 21, STH-MVRV is 0.99. In the bull market, when STH-MVRV is below 1, opportunities usually outweigh risks (only for BTC, not including ALT).

Method 2: From the perspective of market fair price algorithm

We first need to introduce a new concept, namely "True Market Fair Price (TMMP)", whose algorithm and principle are as follows:

TMMP = (Realized Cap - Thermocap) / (Liveliness x Circulating Supply)

There are 3 basic concepts to understand in this formula:

1. Realized Cap:

Each UTXO is valued at the corresponding price at the last move, and the value of all unspent UTXOs in the network is accumulated and summed to get the Realized Cap. Because it takes into account the last move time and price of each Bitcoin , it more accurately reflects the total capital investment that actually flows into the BTC market.

2. Thermocap:

Also known as the total security expenditure, it is the sum of the dollar value of all block rewards (including block rewards and transaction fees) received by miners.

3. Liveliness:

is the ratio of Coin Days Destroyed to all Coin Days Generated.

Coin Days (CD): is calculated by multiplying the number of days each Bitcoin is held by its quantity. One Bitcoin held for one day is equal to one Coin Day.

Coin Days Destroyed (CDD): When a Bitcoin is spent, the Coin Days it holds are destroyed. That is, Coin Days Destroyed is the sum of the Coin Days of all spent Bitcoins.

The numerator of the TMMP algorithm is Realized Cap minus Thermocap, which means that the portion of the total capital flowing into the BTC market that is paid to miners is deducted from the general cost basis of the market. The denominator is Liveliness multiplied by the circulating supply, which represents the number of all currently active BTC (spent).

It covers all active chips on the chain, including ETFs, whales, transfers in and out of exchanges, etc., and excludes the miners, and does not include long-term dormant or lost chips. Therefore, using TMMP as the on-chain cost basis for evaluating active investors to buy BTC in the secondary market is one of the most accurate mean reversion models for analysts to seek investors' on-chain holdings.

As shown in the above figure, the blue line is TMMP, and the gray line is the BTC price; whenever the BTC price stands on the blue line, it means that the market has exited the bear market and entered the bull market cycle. Although there will be false breakthroughs before this, after the effective breakthrough is finally formed, the price of BTC will hardly be lower than TMMP, even when the 5.19 black swan event occurred. But 3.12 is the only exception, which makes the price of BTC lower than TMMP again after entering the bull market cycle.

At the end of the bull market, once the BTC price falls below TMMP, it means the bull market is over. In other words, as long as it is still in the bull market cycle, the BTC price will not be lower than TMMP unless a super black swan event (a level that affects human survival) occurs.

As of June 21, the "real market fair price" evaluated by the TMMP model is $44,940. That is to say, even if a black swan event similar to the May 19 incident occurs, the limit of BTC price retracement will be around $44,900. This price is close to the limit value of $43,129 evaluated by STH-MVRV in the previous article, so I think this is a number worth referring to.

To sum up, we can draw some conclusions:

1. Under the premise that no super black swan event occurs, even if BTC is affected by other macro factors, the maximum retracement value will not be lower than 43,000-44,000;

2. The influence of the so-called super black swan must reach a major level that challenges human life (such as a nuclear war between Russia and Ukraine); obviously, "US economic recession" is not enough.

3. Since it is a limit value, it means “it is unlikely to reach that value” rather than “it may reach that value”.

4. The above analysis period is in the bull market cycle. If the bear market comes, the limit standards of STH-MVRV and TMMP will be invalid.

2. PANews(@PANewsCN): What will happen to the crypto market in the second half of the year?

Independent researcher @santiagoroel shares his investment views for the rest of 2024:

(1) Mainstream currencies (BTC, ETH, SOL) will reach historical highs by the end of the year.

(2) A large number of unlocked tokens will continue to perform poorly, mainly because the unlocked funds hope to surpass the high water mark of the previous cycle, and are therefore insensitive to prices and will be sold at 3-4 times the price under any circumstances.

(3) Watch for the following: (a) top projects such as Arbitrum stabilize and begin to rebound; (b) stablecoin inflows indicate that Altcoin have bottomed out.

(4) DeFi is back – The charts for many established DeFi projects are not bad, boring but gradually rising. These projects are running steadily and generating cash flow. With the increase in institutional interest brought by RWA and ETH ETF, the appeal of DeFi has increased.

(5) The performance of the ETH ETF is the most important dynamic. I foresee several scenarios:

a) Disappointing inflows – Depends on the macro environment. If the macro environment is weak, then nothing matters, as we have seen over the past few years. This is a risk asset and that is how it is. NVDA needs to continue to perform well or we are in for a tough time.

b) Strong inflows – ETFs as investments in cutting-edge technology attract a different investor base than Bitcoin. The market loves tech exposure and ETH is different from anything that exists (REIT + tech). There may be a delay in this narrative, but expect bank analysts to start covering ETH and comparing it to tech, as ETH can be modeled like tech (fees/burns) while BTC is more like a commodity (supply and demand).

In terms of probability, I think the second scenario is more likely, so I believe ETH will hit a new all-time high in December. The election results should be favorable for cryptocurrencies, assuming Trump wins, which will greatly promote capital inflows.

Considering that most of the money comes from self-managed accounts, not RIAs/private banks, where the majority of U.S. wealth (over 60%) is held, this suggests that institutions are still on the sidelines.

That's my view on short-term developments. But I've never been good at market timing. The most important thing is to be patient. Get comfortable in the spot market. Having cash on hand to buy in panics is a smart choice. There are opportunities like this every year in any market environment. Expect them to come and don't rush to chase the market.

Having a long term (multi-year) view will make everything clearer and will allow you to see good opportunities to enter the market when you adopt this mindset. Make sure your expenses are covered. Don't overextend yourself, build your portfolio with bear/worst case scenarios in mind, and the gains in the bull market will take care of themselves.

Embers: Sun Ge withdraws 4,628.9 ETH from Binance again

7 hours ago, Sun Ge withdrew 4,628.9 ETH ($16.06M) from Binance through the 0xDBf…Ec8 address. In the past 3 days, a total of 13,967.7 ETH ($48.85M) has been withdrawn from Binance through the 0xDBf…Ec8 address, with an average price of $3,497.

According to Coinmarketcap data, the top five currencies in terms of 24-hour popularity are: MAGA, TON, ZRO, ZK, NOT. According to Coingecko data, in the crypto market, the top five sectors with the highest growth are: Video, Marketing, Social Money, FTX bankruptcy assets, and Ethereum ecosystem.

Hot Spot Focus - Ethereum Big Short Declaration: ETH/BTC will fall for another year

The launch of the Bitcoin spot ETF provides many potential new buyers with the opportunity to include BTC in their portfolios, but relatively speaking, the impact of the Ethereum spot ETF on ETH itself may not be so obvious. So, how much incremental value can the Ethereum spot ETF bring this time? First of all, I think that unless Ethereum finds an effective way to improve its economic effects, the growth space will be very limited.

Overall, Bitcoin spot ETFs have now accumulated over $50 billion in AUM (Assets Under Management). This is a fairly optimistic number. However, if the GBTC-related fund flows are stripped out, you will find that the net inflow will be reduced to $14.5 billion.

In fact, this number still needs to be further reduced because it still includes many "delta neutral" transactions, especially some "basis trades" (such as buying ETFs while selling futures) and "spot rotations" (i.e. selling spot and buying ETFs). According to CME data and analysis of ETF holders, about $4.5 billion of capital inflows are related to "basis trades"; in addition, some ETF experts have pointed out that large institutions such as BlockOne have carried out huge "spot rotation" operations, and the scale of such transactions is expected to be about $5 billion. Excluding these "delta neutral" transactions, we can infer that the actual net inflow of Bitcoin spot ETFs is about $5 billion.

Bloomberg analyst Eric Balchunas has estimated that the Ethereum spot ETF's capital flow may be 10% of the Bitcoin spot ETF. This means that within six months after the Ethereum spot ETF starts trading, the reported net inflow figure may be around $1.5 billion, but the actual net inflow will be around $500 million. Although Balchunas has missed his predictions on ETF approval, I think his pessimism about the Ethereum spot ETF is informative because it reflects the broader traditional financial market's interest in the product.

Andrew Kang, co-founder of Mechanism Capital, focused on analyzing the potential scale of capital inflows into the Ethereum spot ETF, and based on the differences in the market structures of ETH and BTC, he made a radical prediction that “in the next year, the ETH/BTC exchange rate will continue to fall, possibly between 0.035 and 0.06.”

AC Capital: Cryptocurrency pricing power falls into the hands of Wall Street

1. Stablecoins control liquidity

We cannot ignore the impact of venture capital and team greed, misaligned interests, unethical behavior, and short-term thinking. The market has been in a dark forest for a long time. In addition to the code, there are not many rules to regulate the participants. Although these problems have existed for a long time, they are not enough to explain the weakness of this round of bull market.

Therefore, we propose an additional reason: the self-inflation within the crypto market is no longer sufficient to provide the necessary liquidity for our crypto ecosystem. See the figure below:

The above chart shows the activity of various cryptocurrencies. From the chart, we can see that since 2018, the market share of non-stablecoins has continued to fall. If we look at the proportion of trading volume, in the past one or two years, most transactions have been provided with liquidity by US dollar stablecoins. If the market value of US dollar stablecoins cannot continue to expand, as new coins continue to be issued, the liquidity pool will be drained.

Dry.

In the past, Bitcoin and Ethereum were largely the general equivalents of the market. Bitcoin and Ethereum can be liquidity for others, and in the bull market , Altcoin and mainstream coins as liquidity spiral upward and promote each other. Under such a market structure where the tokens themselves dominate liquidity, Altcoin rarely lack liquidity. Back to now, most trading pairs are stablecoins pegged to the US dollar. Even the explosive growth of the value of Bitcoin or Ethereum is useless, and the status of stablecoins makes it difficult for BTC and ETH to inject liquidity into other tokens.

2. Cryptocurrency pricing power falls into the hands of Wall Street

All stablecoins and other compliant financial instruments pegged to the dollar are bait. Cryptocurrencies follow the Wall Street clock.

In October 2014, Tether began to offer a stable digital currency that bridges the gap between cryptocurrencies and fiat currencies, providing the stability of traditional currencies and the flexibility of digital currencies. Now it has become the third largest token by market capitalization. In addition, USDT has the most trading pairs in the index, 10 times more than Ethereum or wBTC.

In September 2018, Circle partnered with Coinbase to launch USD Coin (USDC) under Centre Consortium. It is pegged to the US dollar, and each USDC token is pegged to US dollar reserves at a 1:1 ratio. As an ERC-20 token, USDC can be seamlessly traded and integrated with various decentralized applications.

On December 10, 2017, the Chicago Board Options Exchange (CBOE) took the lead in launching Bitcoin futures. Even if it is settled only in US dollars, it can have an impact on the spot price of Bitcoin, especially since the current Bitcoin holdings already account for 28% of the global market.

Wall Street not only physically affects the crypto market, but also psychologically affects liquidity in the crypto market. Do you remember when we started paying attention to the Fed's attitude, Greyscale's trust write-downs, the FOMC's "dot charts", and the cash flow of the BTC-ETF? All this information psychologically affects our behavior.

Stablecoins are bait thrown by the US government. Ever since we accepted stablecoins pegged to the US dollar as a means of providing liquidity, it began to accumulate consensus, replacing the liquidity role of crypto native tokens, competing and weakening the credit of other tokens. The US dollar has gradually dominated the general equivalent market.

In this way, we lose our own market rhythm.

I am not blaming the stablecoins pegged to the US dollar. On the contrary, this is the natural result of fair competition and market selection. Tether and Circle help investors invest in assets pegged to the US dollar directly on the chain, allowing them to bear risks equivalent to the US dollar and providing investors with more choices.

The market is struggling for liquidity! Without control over liquidity, we will lose control of the rhythm of the crypto industry.

Biteye: L2 is the worst Meme champion in the first half of the year

The ranking is based on the average YTD (January 1, 2024 to June 21, 2024) price return of the top 10 tokens in each track. The data source is Coingecko. The performance of the cryptocurrency track in the first half of 2024 is shown in the figure below.

1. Meme coin becomes the most profitable track

In recent months, "value investing is all in vain, All In MEME and live in the palace" has gradually become one of the "cryptocurrency trading mantras" in this bull market.

After statistics, there is no doubt that Meme coin is the most profitable track so far in 2024, with the highest average return rate reaching 2405.1%. As of June 19, among the 10 Meme coins with the largest market capitalization, 3 were newly launched around March-April: Brett (BRETT), BOOK OF MEME (BOME), and DOG•GO•TO•THE•MOON (DOG).

Among them, BRETT had the highest rate of return, up 14,353.54% from its issue price; dogwifhat (WIF) rose 933.93% from 2024 to date (YTD), triggering a meme coin craze at the time.

It is worth noting that the profitability of Meme Coin is 8.6 times that of the second most profitable track RWA, and 542.5 times that of the least profitable DeFi track.

(Note: The actual return rate of the Layer 2 track ranked last is negative, so no multiple comparison is performed)

3. The second most profitable track, RWA, has a return rate of 213.5% since 2024

The concept of RWA (Real World Assets) has been discussed constantly in recent months, and major institutions have made arrangements in this field, including BlackRock Fund.

As a result, RWA briefly became the most profitable track in February, ranking first in return rate, but was subsequently surpassed by Meme Coin and AI tracks. It was not until the end of March that it surpassed AI Narrative again, and it also performed well in early June.

Among the RWA tokens with the highest market capitalization, MANTRA (OM) and Ondo (ONDO) have the largest increases, 1123.8% and 451.12% YTD respectively, while XDC Network (XDC) has the worst performance, falling 44.38%. Except for some old DeFi, the RWA project is generally in its early stages and can be paid more attention to.

4. AI track followed closely behind, with a return rate of 71.6%

As early as the end of 2023, the AI ​​track has frequently appeared in the annual outlooks of major investment institutions. As Messari said in its 2024 investment forecast, AI has become the new darling in the technology field. Indeed, it lived up to expectations. From 2024 to date, the average return rate of the AI ​​track is 71.6%, ranking third.

Among them, Arkham (ARKM) had the highest increase of 215.50%, followed by AIOZ Network (AIOZ), which increased by 192.19%. Render (RNDR) and Fetch.ai (FET), which received much attention in the first half of the year, also performed well with return rates of 57.47% and 116.00% respectively.

4. DePIN and Layer1 achieved steady growth

DePIN's return rate was basically negative in the first half of the first quarter, but it began to reverse the downward trend since March, with a return rate of 58.7% to date.

The best performing DePIN token among large-cap DePIN tokens is JasmyCoin (JASMY), with a 323.42% increase, followed by Arweave (AR) and Livepeer (LPT), with YTD increases of 174.07% and 116.06%, respectively.

In contrast, Helium (HNT) performed poorly and was the only large-cap DePIN token to fall by more than 50%, with a return of -50.94%.

DePIN is also one of the tracks that capital is betting on in this round of bull market. If the total market value of DeFi increases 10 times, and the total market value of DePIN reaches half of DeFi, then the total market value of DePIN will reach 500 billion US dollars, with at least 20 times of growth space.

The return rate of the Layer 1 (L1) track from 2024 to date is 43.0%. Although Solana (SOL) has received a lot of attention as a public chain that has given birth to many high-potential memes, with a YTD increase of 22.91%, it has still fallen a lot compared to the return rate of 85.05% in mid-March.

The best performing large-cap L1 cryptocurrencies are actually Toncoin (TON) and Binance Coin (BNB), with increases of 204.72% and 86.10%, respectively.

In comparison, Bitcoin (BTC) is up 45.06% from the beginning of the year after hitting a new high, while Ethereum (ETH) has only increased by 49.65% YTD, which is comparable to BTC, despite high expectations through ETF applications.

5. GameFi, DeFi, and Layer 2 lag behind

The GameFi track has a return rate of 19.1%. It is a track with relatively less market rotation since the beginning of the year. It has raised a lot of funds overall, but has not yet produced a hit product.

The best performing large-cap GameFi tokens were FLOKI (FLOKI) with a 362.79% increase, Ronin (RON) with a 21.16% increase, and Echelon Prime (PRIME) with a 5.27% YTD increase. Other large-cap tokens had negative returns, including GALA (GALA) with a -13.43% increase and Immutable (IMX) with a -32.02% increase.

The DeFi track performed well in the first quarter, boosted by the Uniswap (UNI) fee conversion proposal at the end of February, but it was a little underperforming in the second quarter, with the return rate falling to 3.4% year-to-date. The large-cap DeFi token with a high return rate is Maker (MKR), with a YTD increase of 49.88%.

The Layer 2 (L2) track was the worst performer, with a return rate of -40.59%, almost halved. Among the large-cap L2 tokens, AEVO (AEVO) and Starknet (STRK) performed the worst, with returns of -85.40% and -63.16%, respectively.

The mainstream Ethereum L2 also performed poorly: Optimism (OP) had a return rate of -54.64%, and Arbitrum (ARB) had a return rate of -53.71%. What is more noteworthy is that Mantle (MNT) was far ahead, with a YTD return rate of 26.09%.