"One cannon shot brings in a ton of gold"?
Around 9:00 this morning, with the breaking news of "a strong explosion occurred near the Iranian capital Tehran" and "explosions were heard in Iran, Syria and Iraq" occupying the front page headlines, the situation in the Middle East became tense again under the "round-based" back-and-forth between Israel and Iran, and the price of gold quickly broke through US$2,400, soaring for five consecutive weeks.
At the same time, Bitcoin, which was previously regarded as "digital gold", went the other way, falling below the integer thresholds of 63,000 USDT, 62,000 USDT, and 61,000 USDT, and once fell below 60,000 USDT, falling to a recent low of 59,587 USDT (OKX spot data, the same below); Ethereum also fell below 3,000 USDT and 2,900 USDT during the same period, reaching a low of 2,864 USDT.
Data from Coinglass shows that over the past four hours, more than $100 million was liquidated across the entire network, of which $94.57 million was liquidated on long orders. The altcoin market is in even more mournful wailing, with many cases of halvings in the past half month.
What is quite dramatic is that as of the time of writing, OKLink data shows that there are less than 20 hours left until the fourth Bitcoin halving, but the market has poured cold water on everyone with an attitude of "asset halving ahead of schedule", making market expectations even more pessimistic.
Whether this round of decline is a trend reversal or a mid-term correction becomes the key for everyone to participate in the next market trend.
What are the reasons for the plunge?
To briefly summarize the possible reasons that may have contributed to this round of sharp decline, they should be mainly divided into two dimensions: internal and external, including factors such as geopolitical conflicts, the Federal Reserve's collective hawkish stance, and internal incentives for ETF fund outflows.
The impact of the Middle East conflict on global financial markets
The first is naturally the impact of the Middle East geopolitical conflict on the global financial market. First of all, we need to make it clear that since the institutions entered the market in a big way last year, especially after the spot ETH was approved at the beginning of this year, Bitcoin’s "safe-haven asset" attribute has actually become a kind of metaphysics. In essence, it is a "risk asset" - it is more closely related to the global macro environment and the bull and bear cycles (recommended reading: "When the cannon is fired, a lot of gold"? A guide to crypto investment under geopolitical turmoil).
The series of conflicts between Iran and Israel this time has, to some extent, increased the possibility that geopolitical risks in the Middle East will drag down global oil supply. After the latest news of the conflict came out this morning, the price of U.S. WTI crude oil futures rose by more than 2.5% during the day, reaching $85 per barrel at one point, and the price of Brent crude oil futures also rose by as much as more than $89 per barrel.
If the conflict expands and even involves the nuclear facilities of both sides, it may cause oil prices to continue to rise, which will undoubtedly make the US's anti-inflation process worse, and in turn increase the possibility that the Federal Reserve will choose to continue raising interest rates in the future. Therefore, as a "risky asset", Bitcoin's decline seems understandable due to the strengthening expectations of interest rate hikes.
At the same time, this also casts a cloud of doubt over the recently turbulent U.S. stock market - affected by this morning's news, the three major U.S. stock index futures widened their losses, with Nasdaq 100 index futures falling more than 2%, S&P 500 index futures falling 1.5%, and Dow futures falling 1.32%.
The Fed's overall attitude turns hawkish
In addition, in the past two months, the market's original expectation that the Federal Reserve would turn to interest rate cuts in the middle of this year has been significantly shaken, mainly because more and more senior Federal Reserve officials have begun to mention "interest rate hikes":
First, the third-in-command of the Federal Reserve, New York Fed President Williams, warned that if the data showed that the Fed needed to raise interest rates to achieve its goals, then the Fed would raise interest rates; Atlanta Fed President Bostic also said that if US inflation rises, he would be open to raising interest rates.
More importantly, in Powell's speech this week, he also said that in the absence of further progress in inflation, it might be appropriate to let high interest rates work for a longer period of time. Nick Timiraos, a reporter from the Wall Street Journal who has always been regarded as the "new Fed news agency", commented that there has been a clear change in the Fed's outlook, which seems to have shattered their hopes of a "preemptive" rate cut.
You should know that at the end of last year and the beginning of this year, the market expected the Federal Reserve to cut interest rates 5-7 times in 2024, and the first rate cut was in March .... This also prompted U.S. Treasury yields to soar again, with the 10-year yield breaking through the 4.75% mark. Wall Street investment banks even warned that the short term may "return to the 5% era."
At the same time, since April, the United States has released a series of financial-related data intensively, including retail sales data, initial jobless claims, non-farm payroll data, etc., all of which have performed strongly. Regardless of their credibility, at least from a data dimension, they have provided room for interest rate hikes again.
Against this background, it is understandable that some risk funds adjust their positions.
ETF funds have seen net outflows for 5 consecutive days
In addition, there is a signal worth paying attention to - according to SoSoValue data, the Bitcoin spot ETF had a total net outflow of US$23.15 million on April 18, and has had net outflows for five consecutive days .
As of the time of writing, the total net asset value of the Bitcoin spot ETF was US$52.41 billion, the ETF net asset ratio (market value as a percentage of the total market value of Bitcoin) was 2.82%, and the historical cumulative net inflow reached US$12.24 billion.
It is particularly noteworthy that Ethereum has taken the lead in falling to near the 120-day line, and the weekly line of BTC/ETH has also been negative for three consecutive weeks, which is extremely ugly in shape.
It should be noted that the 120-day line has always been regarded as one of the most important bull-bear dividing lines. Therefore , whether Ethereum can hold this trend line and rebound strongly, as well as the subsequent performance of Bitcoin, is particularly critical .
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