The current price of Bitcoin is mainly due to the arbitrage between spot ETFs and futures contracts. Once the price difference disappears, Bitcoin is at risk of a sharp drop in the short term. The current rise in the Bitcoin market is mainly driven by ETF expectations. During this round of rise, a total of about US$15-18 billion entered the market.
The sources of ETF buying include 6-8 billion US dollars of arbitrage funds. Bitcoin holders with about 5 billion US dollars transferred Bitcoin into ETFs. The long-term holding part is about 5-6 billion, and the remaining 3 billion is active buying. ETFs are concentrated in Coinbase for special custody, which is equivalent to taking Bitcoin out of the circulation market, resulting in a reduction in supply. ETF arbitrage takes advantage of the price difference between Bitcoin and futures. When the futures price is higher than the spot price, investors can buy Bitcoin in the spot market and short it in the futures market to make a profit.
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Trading data from CME and Binance show that CME's open interest is high, reflecting that a large number of positions are not traded on a daily basis, but are used for arbitrage. High premiums trigger more arbitrage behavior, and arbitrageurs lock in risk-free returns by buying ETFs and short futures at the same time.
Arbitrage in the Bitcoin market drives up prices through the premium of CEX and futures contracts. Arbitrageurs buy Bitcoin futures contracts, push up the futures premium, and then buy Bitcoin through arbitrage, forming a cycle. However, these arbitrageurs make more money when Bitcoin prices fall, because futures prices usually fall more than spot prices, and they can sell futures and spot at the same time to realize profits. Currently, the premium of Bitcoin ETF is still around 10%, which attracts more arbitrage funds into the market and maintains the price of Bitcoin. However, this also brings risks. Once the premium disappears, arbitrageurs may quickly withdraw from the market and sell ETFs and futures, causing prices to plummet.
There is no bull market for BTC at present. There are two scenarios for the price of Bitcoin. One is that the price of Bitcoin soars to $100,000 or $150,000, driving a bull market with other cryptocurrencies. The other is that the price of Bitcoin fluctuates between $50,000 and $70,000. The former is difficult to predict, but ETF buying and arbitrage funds can support Bitcoin to remain in the latter range.
BTC is highly correlated with the U.S. stock market. Insufficient liquidity and high interest rates suppress the bull market in the altcoin market.
BTC is highly correlated with the U.S. stock market, especially with U.S. bonds: we can not only judge its correlation by looking at the price fluctuations of the day, but also analyze it from the nature of assets and trading behavior. BTC is highly correlated with risky assets, especially liquidity risky assets, which are significantly affected by the Fed's policies and the liquidity of the U.S. dollar.
Since 2021, the crypto has undergone tremendous changes. The introduction of USDT has made it easier for funds to flow between the crypto and the external market. Previously, funds in the crypto circulated internally, but now the popularity of USD stablecoins has changed this situation. The growth of mainstream currencies such as ETH has driven the rise of Altcoin.
As a liquid asset, Bitcoin and other crypto assets are compared with the US stock market on the same level due to the intervention of the US dollar token. In the Bitcoin market this year, there is a lack of money-making effect due to the lack of liquidity. The poor long-term interest rate of the US dollar has destroyed the previous capital circulation model. It is difficult for Altcoin to form a bull market, mainly because of insufficient liquidity and high interest rate environment that suppress market activities. As a liquid asset, Bitcoin behaves similarly to lagging gold or unprofitable US stocks.
The Fed may cut interest rates or start QE, and assets such as Bitcoin may usher in a bull market
There are two main reasons why the US stock market may experience a major adjustment: First, the US economy will experience a hard landing. If Trump comes to power and implements inflation and deficit reduction policies, the issuance of government bonds will decrease. Once the issuance of government bonds, which economic growth depends on, decreases, it will inevitably lead to a hard landing and a decline in corporate profits. Currently, the profits of AI companies depend on the four major cloud companies, and the revenue of these companies mainly comes from advertising. If the economy experiences a hard landing and advertising revenue decreases, the revenue of Meta and Google will drop significantly.
Second, market expectations are adjusted. Take Nvidia as an example. The market has extremely high expectations for its performance. If the performance fails to exceed expectations, the stock price will plummet. Similarly, although Microsoft's performance met expectations, its earnings were slightly reduced, causing its stock price to plummet. This expectation adjustment may occur at the end of this year or the beginning of next year, triggering a substantial market adjustment.
Although the U.S. stock market may experience a 20%-30% correction, it usually rebounds in the short term. If the U.S. stock market plummets, the impact on Bitcoin will be a devastating blow. After that, the Federal Reserve may cut interest rates or start QE, which may drive assets such as Bitcoin, Ethereum, BNB and Solana to a bull market.
Big money usually flows to BTC, ETH, BNB and Solana
The valuation of new projects mainly depends on whether they can attract the next round of investors. Most of the data of Web 3 projects are not real, so the evaluation focuses on two key points: whether they can attract new investors and whether the project is unlocked after listing. Currently, there are no projects that have come out. The key is whether they can be listed on Binance. As long as they can be listed on Binance, there will be trading opportunities.
Altcoins will mostly return to zero, or at least drop by 90%. This is mainly due to liquidity issues and lack of activity in Altcoin. A few Altcoin such as Solana can continue the nesting game and complete the self-circulation.
The valuation model of the entire crypto market is similar to that of a casino. Mainstream currencies such as BTC, ETH, BNB, and Solana are regarded as casino stocks. Belief is the key to supporting their value, and large funds usually flow to mainstream currencies. If you want to allocate assets, Solana is a good choice. Yesterday's article " Why is it so difficult to make money in this round of bull market? It's better to just take the BTC Ethereum SOL " also compared the current situation of new and old projects in detail. Interested friends can go and read it.
Bitcoin halving has less impact on the market, and prices are more affected by trading volume and macro factors
Bitcoin's four-year halving cycle has little impact on the market. Although halving will lead to a reduction in supply and increase deflation costs, miners, as price takers, have little bargaining power and have limited impact on Bitcoin prices. Market prices are more affected by trading volume, macro factors, and other buyers and sellers. The impact of the halving cycle is gradually decreasing, and it is unrealistic that the halving cycle will inevitably bring about a bull market. The key is the influx of a large amount of new funds brought about by the combination of various factors. Only with money can the market be pulled up. Without money, there is no bull market.
Later, I will bring you analysis of leading projects in other tracks. If you are interested, you can click to follow. I will also organize some cutting-edge consulting and project reviews from time to time. Welcome all like-minded people in the crypto to explore together. If you have any questions, you can comment or private TTZS6308. All information platforms are Tuanzi Finance .
I plan to accept three more one-on-one classes at the end, but I won’t accept any more. To be honest, I can’t handle too many. After all, my energy is limited.
Currently, there are basically no good opportunities for retail investors to get on board BTC. The focus is to lay out high-quality copycats in the later stage and strive to achieve an overall return of no less than 10 times this year.
