The information, opinions and judgments on markets, projects, currencies, etc. mentioned in this report are for reference only and do not constitute any investment advice.
Market summary:
Against the backdrop of increasingly complex situations in the Middle East and the postponement of interest rate cuts in the United States, Bitcoin experienced its fourth halving on April 20. The output of Bitcoin dropped from 6.25 coins per 10 minutes to 3.125 coins, and the annual output dropped from 328,000 coins to 164,000 coins. This is a far-reaching halving, and Bitcoin has become the only major asset class with an annual inflation rate below 1%, with an annual inflation rate of only 0.8%, which is also far lower than the 2% of gold, opening a new chapter in the Bitcoin bull market.
Although the absolute number of production cuts has decreased significantly compared to four years ago, the number of BTC in centralized exchanges that determine BTC's short-term pricing power has decreased from 3.06 million in the previous cycle to 2.29 million, resulting in an annual production cut accounting for 7% of short-term liquidity, which has not decreased proportionally compared to the 10% in the previous cycle. Considering that the proportion of long-term holders has increased by 14% compared to four years ago, the market supply deflation caused by this halving is still very large. The total production cuts in four years account for 28% of short-term liquidity. Considering that the number of coins held by centralized exchanges will continue to decline, this number can actually exceed 30%. I believe that the law of ushering in a super bull market within 18 months after the halving will still reappear.
Back to last week, Bitcoin continued to adjust, falling below $60,000 to $59,600, and reaching a high of $66,867. It is currently fluctuating around $64,000, with an overall fluctuation of 11%. This is basically a microcosm of the past four weeks: repeated fluctuations between $60,000 and $70,000. This shows that after Bitcoin quickly created a new historical high, the adjustment momentum has not yet been fully digested.
Calculated at the lowest point of 60775, BTC has dropped 19.2% from its all-time high of 73777, which is very close to the 21.2% drop from $48,000 to $38,000 on the day the ETF was approved. We believe that Bitcoin has strong support around $58,000, and the deep shock may be coming to an end.
Supply and demand structure:
The support for Bitcoin prices comes from three aspects:
1. Cost line of short-term investors. The profit of short-term investors (within 5 months) has dropped from 46% to 4%, close to the break-even line of $58,800. Since January 2023, when Bitcoin started from the bottom of $16,000, the price has rebounded significantly every time it approaches the cost line of short-term investors.
This is because short-term investors are the actual makers of Bitcoin's short-term prices, and in an overall upward correction or bull market expectation, the cost line is more likely to become a support rather than a pressure level.
2. The shutdown price of miners after halving. After the fourth halving, the theoretical shutdown price of the mainstream S19 series in the United States, the world's largest mining market, is also around $58,000. In the history of Bitcoin, every time it approaches the cost price of mainstream mining machines, it is often a big bottom. This is because the shutdown cost of miners is often lower than that of short-term investors. Reaching this area often means that the market has seen a large-scale clearing, and then the bottom is formed.
3. We have previously disclosed that the average cost of US ETFs is about $55,000. If the price drops further into this range, there will be relatively strong support. Currently, US ETFs hold about 830,000 bitcoins, which is the largest single type of investor group in the market.
Of course, the market did not drop to $58,000. It rebounded to around $65,000 just after falling below $60,000. It is difficult to judge whether Bitcoin has stepped out of the adjustment range in the short term. Further price increases and time accumulation are needed, but we are relatively clear about the bottom that is sinking further.
During the oscillation period, we saw an extremely mild net outflow of funds from US ETFs as a whole, with a total outflow of about US$200 million last week, which is far from the net inflow of US$500 million to US$1 billion a day in March. This is a good sign overall, showing that new investors have maintained sufficient patience as a whole.
Since its launch in January, the US ETF has purchased a net 210,000 bitcoins. Since most US institutions and funds need 90 trading days (June) to buy Bitcoin ETFs, it is believed that the trend of net inflows will continue by then.
Fundamentals:
In terms of BTC fundamentals, the gas fee for on-chain transfers rose sharply due to the launch of the BTC L2 runes protocol mainnet and the launch of new assets, but it only lasted for 2 days before returning to normal. Other factors such as on-chain active addresses and new entities showed a significant decline compared to last week.
EMC BTC Cycle indicator:
The EMC BTC Cycle indicator shows that we are in the early stages of the bull market acceleration period (indicator strength 0.75, compared to 0.75 last week and full strength of 1).
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