First, let's review the trend in 2024.
2024 can be said to be the first year of the crypto industry's impact on the US political arena. We must admit that BTC has not disappointed anyone's expectations over the years, just as Mr. Star Xu, the founder of OKX, said, he has not seen any fund that can outperform BTC over the years. In early 2024, with the approval of the US SEC, the BTC ETF was approved, and after a brief redemption and sell-off, the price of BTC fell from around $49,000 to around $38,000, kicking off a bull market with BTC ETF inflows far exceeding expectations, reaching a high of around $73,000. As the novelty of the US investors towards the BTC ETF wore off and the international situation became turbulent, BTC fluctuated widely between $50,000 and $70,000 for 6 months. The narratives during the fluctuation period mainly revolved around the Fed's interest rate cuts and Trump's campaign for the US presidency and participation in the Bitcoin conference.
On the eve of Trump's election, BTC surged again, but stopped at around $73,700, the previous high, and did not break through it, and adjusted with capital flight, falling to around $66,000. Then, with the interplay of the two parties in the US, confirming Trump's election as US president, BTC surged again, breaking through the previous high of $73,700, and independent of the US stock market, it entered a major bull market, with a gain of nearly 50%, surging to a high of around $108,000.
On January 7, as the US employment data exceeded expectations, the market lowered its expectations for the Fed to cut interest rates in 2025, and BTC fell in sync with the US stock market from $102,000. Then, as the non-farm data continued to be negative for interest rate cuts, there were even rumors in the market that the Fed would raise interest rates again, and BTC fell to a low of $89,000, "benignly" but "terribly" retesting the dense liquidity area, producing a strong V-shaped rebound, during which CPI and PPI data were positive, and the market again raised its pricing for the Fed to cut interest rates in 2025, with BTC rising over 15,000 points as of the time of writing. BTC has not set a new high, stopping at around $106,000, and then, with Trump issuing an official Meme coin on the Solana network, BTC was "drained" and fell, while Solana rose over 50%.
Then let's observe the dynamics of some on-chain whales:
The well-known ETH swing trader with an 84% win rate has shorted BTC and ETH with high leverage, with an average short price of $103,155.8 for BTC and $3,442 for ETH, and the current health of the main wallet is 1.61;
The smart money that made $5.16 million shorting $BTC during the LUNA/UST collapse bought 31.17 WBTC and cbWBTC at an average price of $103,872, worth $3.19 million, and it is uncertain whether they will continue to increase their positions;
The smart money that made $4.92 million in profits through $PEPE swings over the past six months has cleared out 588.2 billion PEPE (worth $10.99 million), making a profit of $1.053 million.
In simple terms, some whales have chosen to clear their positions and exit to avoid risks; some whales have chosen to believe in Trump's next grand narrative and bought some BTC positions; and some aggressive whales have chosen to heavily short with leverage, betting $10 million on "Sell The News", that Trump's inauguration will have a strong impact on the crypto market, with positive news turning into negative.
From a technical chart perspective, BTC has broken through the downward trend line and found strong support in the previous dense liquidity area, which can be understood as a "golden pit" at the bottom, forming a V-shaped rebound, and also breaking the lower high, lower low downward structure, forming a higher high, higher low upward structure. From the perspective of many people's recognition of the 4-hour EMA200 as the "bull-bear dividing line", BTC's current price is still above the 4-hour EMA200, which can be seen as the BTC bull market has not yet ended.
And when we look back on the narrative of the BTC ETF just passing, we can find that the structure of the two is actually very similar, breaking through the downward trend line and forming a "golden pit" with a V-shaped rebound. After the BTC ETF broke through the downward trend line, it continued to break through the previous high, entering the second half of the bull market. Will this Trump narrative also see such a climax?
There are two perspectives to consider here:
The first perspective is that the bull market before the BTC ETF was passed had a very small amplitude, less than 20%, while the Trump narrative has already brought a rise of nearly 50% from around $70,000 to around $100,000, which has already discounted the bull market, or the market has already fully priced in the Trump narrative; the direct evidence is: first, in the early morning of January 18, BTC was very close to the historical high, but then fell back, and did not create a new ATH; second, after Trump issued the official Meme coin, it drained BTC, with the SOL/BTC and SOL/ETH exchange rates surging 20%, and for the crypto market, the liquidity is not abundant, an increase in liquidity in one area is at the expense of a decrease in liquidity in another, and there is no independent increase in liquidity.
The second perspective is that the narrative of the BTC ETF and the narrative of Trump's election are not of the same magnitude, the narrative of the BTC ETF only brought the inflow of the stock market's existing capital into the crypto market, while the narrative of Trump establishing a national strategic reserve of BTC and other measures will bring more capital from the national market, and will also increase the proportion of the stock market's existing capital paying attention to the crypto market, so the capital inflow will be greater, and the narrative will be more grand.
Next, let's interpret it from the perspective of the macro narrative.
Currently, the two narratives that have a major impact on BTC are: first, the macro environment, the Fed's interest rate cut decision and Japan's interest rate hike decision, which are related to the operation of the global financial market; second, the Trump narrative.
The Nikkei Index also has a very profound impact on the crypto market, the reason is that the Yen Carry Trade is a foreign exchange trading strategy. Due to Japan's long-term low interest rate policy, investors can borrow Yen and then exchange the borrowed Yen for other high-yield currencies (such as the Australian Dollar, New Zealand Dollar, etc.), and then invest in the high-yield currency country's bonds or local stock market, etc. to earn the interest rate spread, and the Yen interest rate hike will have a huge impact on the Carry Trade, reducing the liquidity in the global financial market, and BTC's flash crash in the middle of 2024 from around $70,000 to around $49,000 was precisely due to the impact of the Yen interest rate hike.
The Bank of Japan will hold a monetary policy meeting from January 23 to 24, 2025. In terms of inflation, Japan's inflation level has remained above the 2% policy target since April 2022. For example, in June 2024, the consumer price index (CPI) excluding fresh food increased by 2.6% year-on-year, higher than the 2.5% in May; in November, Japan's core CPI rose 2.7% year-on-year, up 0.4 percentage points from October, and the core CPI excluding energy also showed an improving trend, reaching 2.4%. Fitch has revised up its forecast for Japan's CPI at the end of 2024, and expects the potential inflation rate in the first quarter of 2025 to remain around 2%, and the core inflation rate excluding fresh food to reach 2.2% in 2025, close to or higher than the Bank of Japan's 2% target. The employment and wage sectors have also shown related trends. In November 2024, Japan's unemployment rate remained at a low level of 2.5%, with the labor market remaining tight, putting upward pressure on wages. Japan's wage growth exceeded 5% in 2024, significantly higher than the inflation rate, driving an increase in the real wage growth rate of residents. Specifically, in November 2024, basic wages grew 2.7% year-on-year, the fastest pace since 1992, while nominal wages grew 3%, exceeding economists' expectations. The latest Reuters survey shows that the expected wage growth rate in Japan's labor-management negotiations this year is 4.75%, up from 4.70% in the December survey, so the market expects the Bank of Japan to be more likely to raise interest rates at this meeting.
The Fed's interest rate cut decision has been in a relatively volatile state: the US core CPI rose 3.2% year-on-year in December, with the month-on-month increase slowing from 0.3% last month to 0.2%, both lower than market expectations, and the December core PPI rose 3.5% year-on-year, expected 3.8%, previous 3.4%. Overall, the slowdown in inflation has to some extent alleviated market concerns about the Fed not cutting interest rates or cutting them very late. If future inflation data can continue to maintain this moderate downward trend and approach the Fed's 2% target, the Fed's concerns about inflation will gradually diminish, thereby increasing the possibility of interest rate cuts. The unemployment rate in December 2024 fell to 4.1% month-on-month, and non-farm payrolls increased by 256,000, the highest since March last year, indicating the resilience of the labor market. The strong employment data have led the market to generally expect that the Fed will not easily cut interest rates in the short term, as Boston Fed President Susan Collins mentioned that due to the strong employment data and persistent inflation, the interest rate cut will be lower than previously expected, and the Fed may only cut interest rates twice this year.
It is not difficult to find the reason for the decline on January 7th. The narrative of the crypto market is currently not only related to Trump, of course, we do not rule out that after Trump takes office, there will be a period of time due to Trump's unwavering absolute support for cryptocurrencies, which will be strongly correlated with Trump's actions, but we still need to be vigilant about the risks of global financial market turbulence.
Let's review Trump's promises and actions after his election. Since Trump's confirmation of his election, there has not been a complete void period in the Trump narrative. There have been World Liberty's Strict Selection: ENA, LINK, ONDO, AAVE; US Crypto Reserves (Alternative Version): XRP, SOL; Although he did not actively dismiss SEC Chairman Gary Gensler, Gary Gensler's voluntary resignation is the same, and Gary Gensler's resignation is unanimously interpreted by the industry as a shift from strict to loose regulation of cryptocurrencies, and Paul Atkins has been confirmed as the new SEC chairman, who is known as the SEC chairman most knowledgeable about cryptocurrencies, having served as an advisor to the Reserve Protocol in recent years.
Related reading: Continuing to charge ahead or stealthily cultivating? Things you need to know about the crypto industry after the 2024 election.
Undoubtedly, Trump is the most pro-crypto president in US political history, and his contribution is groundbreaking, but his promises and actions before taking office still cannot make BTC independent of the overall macroeconomic operation. After taking office, with full power in his hands, whether he can make BTC independent of the US stock market and gold, and even "suck" gold, making BTC a new strategic reserve, we cannot yet draw a definitive conclusion.
Then let's look at the data.
On-chain data:
From the above figure, we can see that we have already passed the "danger period", and the low point of the blue line is constantly rising. That is to say, from the current position, even if the red line retreats again, the lowest point has already risen to the position of MVRV 2.16, corresponding to a BTC price of around $90,000. Similarly, it is not necessarily certain to reach this level; in the short term, after the CPI data is released, the momentum of BTC's rebound to above $100,000 this time will be greater than the performance of the rebound to $102,000 on January 6th. When the price is lower but the "NRPL (realized net profit/loss)" is higher, it means that through this period of repeated consolidation, the high-position chips have basically completed the turnover at low positions, and the average cost of the active chips has been reduced. Therefore, more net profits can be created in the rebound. From this perspective, BTC has the conditions to continue to rise in the short term, and the possibility is very high. When we divide the short-term holders into three different groups of 1d-1w, 1w-1m and 1m-3m, their average holding costs have begun to converge.
The convergence of multiple lines indicates that the costs of both the ultra-short-term chips and the slightly longer-held chips have become almost the same. In this way, the market will enter a relatively balanced state, in which there are no chips with particularly high costs or particularly low costs in the short-term chips, and everyone is about the same. Then, when facing market fluctuations, the overall sentiment will also become relatively stable.
From the perspective of stablecoins:
Excluding most of the other stablecoins that most people don't use, only USDT and USDC, the supply of USDT has decreased by $4 billion from its December high, while the supply of USDC has increased by $6 billion from three months ago, to some extent indicating that the main investors in the crypto circle, US investors, are still optimistic about the market going forward.
From the perspective of futures positions, the positions have dropped sharply, and the funding rate has quickly dropped to negative values, indicating that the long positions in this round of the market have seen a certain scale of liquidation, and the shorts have chased the price. Interestingly, the funding rate turning negative is often a sign of a bottom. It is likely that when Trump officially takes office, it will be a bloody battle between the bulls and bears.
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