The cryptocurrency market recovered slightly last week, with the price of Bitcoin climbing from US$25,500 to US$26,500, an increase of about 4%, and Ethereum also exceeding US$1,600. However, the overall trading volume and liquidity are still sluggish, and we have not seen too much. Positive signals, we even believe that the market rebound may only be a short-term phenomenon. Although inflation concerns have been almost resolved and the Fed will not continue to raise interest rates, there are still many challenges in the cryptocurrency market that need to be overcome.
The first is FTX’s allegedly $3 billion crypto assets. Two days ago, the reorganization team has obtained the court’s liquidation permission. The team can liquidate the crypto assets at the right time and convert them into legal tender and then compensate creditors. In order to get it right in a timely manner When FTX starts selling, some companies are already tracking the dynamics of FTX wallet addresses. As long as money is transferred to crypto exchage, there may be a downward trend. Traders will then be able to make profits through short selling. Trading activities on the short side are more active. This Points are the risks that need to be paid attention to when entering the crypto market in the near future.
These $3 billion in crypto assets include $1.1 billion in SOL, $600 million in BTC, $230 million in ETH, and $120 million in USDT. The remaining assets of about $1 billion are small and medium-sized crypto tokens. In order to facilitate repayment, the FTX team These crypto assets will be liquidated into legal tender for repayment, including over-the-counter transactions and batch sales. However, there is almost no over-the-counter trading market for the small and medium-sized tokens worth US$1 billion, and there is a high probability that they will all be transferred to transactions in the end. The direct sale is expected to have a significant impact on market prices.
The remaining mainstream cryptocurrencies still have the opportunity to use over-the-counter transactions to sell. It should not be difficult to take advantage of the current liquidity, but it will still affect the market's upward momentum. Even if the team entrusts an external operation team to try to avoid price fluctuations, in the end it will still It will bring a lot of selling pressure to the market. Even if the currency price does not fall, it will be difficult to rise. This is not good news for the market. As long as FTX starts selling, other investors may also leave the market. This kind of news has caused The market is paying attention to the fact that many investors want to use FTX news to short the currency price, which is also one of the rumored reasons for the decline in the crypto market last week.
Therefore, it can be observed that the overall fluctuations of the crypto market are not large, but the small and medium-sized tokens have fallen completely in terms of weekly gains. From the decline of APE, AVAX, IOTA and other tokens by more than 8%, we can know that the crypto market Internal funds are flowing back from small and medium-sized tokens to mainstream cryptocurrencies.
Another important event last week was the return of the latest August price index. Although it has been talked about badly, when the August price index was just released, when we saw a monthly increase of 0.6%, we originally thought that inflation Once again, investors may speculate that the Fed will show a more aggressive attitude towards raising interest rates, which will eventually lead to a sharp fall in asset prices. Later, after more in-depth analysis of the data, they found that the results of this price index report are actually quite positive.
The latest price index shows that the annual growth rate of the price index in August has climbed back to 3.7%, which is higher than the market’s original expectation of 3.6%. However, the main reason can be summarized as the sharp rise in oil prices and energy prices. After excluding energy factors, inflation remains unchanged. It is within a controllable range or the price increase is not obvious, which reduces the pressure on the crypto market and provides some impetus for Bitcoin's slight rebound last week. Let's further analyze the composition of the price index.
A. On September 12, Bitcoin fell to US$25,000, a decrease of about 3%.
Compared with yesterday's rebound in the United States, the performance of the crypto market is not ideal. Bitcoin further broke through the support of US$26,000 and fell slowly to US$25,000. The lowest price was even around US$24,500, which means that investors are still selling one after another. For several recent transactions There are also divergent opinions in the selling community, but some analysts pointed the finger at FTX's move to liquidate crypto assets. Yesterday happened to be the day when the exchange began selling crypto assets.
FTX currently holds approximately US$3 billion in crypto assets that need to be sold off. According to the restructuring team, it will be done through over-the-counter transactions and batch sales, but now no one can use over-the-counter transactions to sell off such a huge amount of cryptocurrencies. , in the end it can only be sold through the exchange. This move has caused concerns among investors. Although there is no evidence, we subjectively believe that yesterday’s drop is related to the liquidation of FTX.
In this regard, several analytical institutions have also launched "FTX Liquidation Tracking". Analysts use the trend of FTX wallet addresses to determine whether the exchange is selling cryptocurrencies in the secondary market, rather than over-the-counter transactions as originally claimed, but as our weekly report The mentioned trend speculation shows that even if FTX does not cause the market to collapse, it will be difficult to rise. When the risk exceeds the reward, not many people want to bet on a flat market. If you are more radical, you will choose to short, and if you are more conservative, you will go short. Withdraw funds directly and wait for the next opportunity to enter the market.
B. On September 14, the US price index increased by 3.7% year-on-year, and the market reaction was relatively calm.
The U.S. Department of Labor released the latest August Price Index (CPI). Due to the impact of production cuts by oil-producing countries, rising global oil prices have caused energy prices to rise, resulting in a monthly increase of 0.6% in the price index, and an annual increase of 3.7%, slightly higher than The market response to this is not as drastic as in the past, as economists have previously seen the increase in oil prices and revised upward the overall price index growth.
On the other hand, the core price index excluding food and energy increased by 4.3% year-on-year, which was the same as last month's annual increase. There was no significant increase. Moreover, prices mainly came from the increase in air ticket prices, which was also affected by oil prices. , has little impact on the overall situation. This result has kept the market calm to a certain extent, but the U.S. bond yields have still risen slightly. The ten-year U.S. bond has reached 4.25%, but there has not been much change in the short-term period, which means that investment People think that the Fed will only prolong the interest rate hike cycle, but will not carry out any more radical interest rate hikes.
In other words, although the price book figures appear to be that inflation is still rising, if you exclude oil prices and air ticket prices that are affected by oil price fluctuations, inflation is actually cooling or staying flat, and the Fed will not be affected by this factor. To raise interest rates, interest rate futures are still betting 95% that the Fed will not raise interest rates at the FOMC meeting at the end of September. Cryptocurrencies responded in advance, with the price of Bitcoin rising slightly from US$25,500 to US$26,200.
C. On September 15, Bitfinex research pointed out that the crypto market’s capital outflows reached US$55 billion in August.
The crypto exchage Bitfinex said in its latest research report that the liquidity of the crypto market is facing difficulties. In addition to trading volume hitting new lows, funds have also continued to flee. It was found that capital outflows reached US$55 billion in August this year. This report Based on the "realization capital" of Bitcoin and Ethereum and the market supply of five other stablecoins, including USDT, USDC, TUSD, BUSD and DAI, we can estimate the flow direction of market funds.
Through the analysis of these data, the report points out that funds began to flee as early as early August. The situation of capital flight not only affects the prices of Bitcoin and Ethereum, but also affects the market trading depth of stablecoins. Bitfinex research shows that in August this year, cryptocurrency This is the month with the worst capital outflows, but it also means that the volatility of the cryptocurrency market has gradually returned, and it is no longer as unresponsive to any news as in previous months.
Bitfinex analyzed two independent events that occurred that month, namely the flash crash on August 17 and the 7.6% surge in Grayscale's victory on August 29. These two independent emergencies suggested that although market liquidity was low, However, the news can already affect the price trend of the encryption market. The most feared things in market trading are low volatility and low trading volume. At present, the situation seems to be improving. In the end, this research report still believes that the encryption market situation is improving.
Inflation worries only remain in energy, and funds begin to flow back into the cryptocurrency market
Next, when splitting the price index, we must first exclude energy items with a monthly increase of 5.6% and highly volatile food items. The remaining core price index increased by 0.3% monthly, which is still slightly higher than 0.2% last month but not significantly. , the main reason for the increase is that oil prices have driven up air ticket prices, causing the "mass transportation" price index to increase by 2% monthly. This will only be a short-term inflation problem. When oil prices fall in the future, they will return to normal. In addition, the price that worries investors the most The index's monthly increase was only 0.3%, which was in line with market expectations.
Although energy prices have risen sharply, such as gasoline and energy prices, which have increased by about 10%, this time because the base period last month was too low, if we look at the annual increase, the current energy price index is still down by about 3.6% annually. At present, analysts almost exclude energy when looking at inflation. Therefore, it can be concluded that inflationary pressure is indeed slowing down after excluding energy factors, which in turn stimulates a small rebound in the U.S. stock market and cryptocurrency. Due to the trend of inflation, The slowdown in market expectations has long been included in the evaluation. This time the market did not rebound violently. The market response can be said to be in line with expectations and relatively indifferent.
Another lottery result last week was the Producer Price Index (PPI). The result also exceeded market expectations, with an annual increase of 1.6%, higher than the market estimate of 1.2%. However, there was no sharp drop because behind it was still rising oil prices. This is because the surge in oil prices is due to production cuts by oil-producing countries. There will be plenty of production increases or other countermeasures in the future. Investors do not need to worry about energy-driven price increases, because sooner or later, economic growth will slow down in the future. And fall back.
Because of this, the Fed's interest rate futures forecast has not changed, showing that the chance of the Fed suspending interest rate hikes in September is almost 100%. Why does the Fed still choose to suspend interest rate increases even though prices are rising faster than expected? Last month's employment report showed that the U.S. job market, which has benefited from the travel and tourism industry, has gradually cooled. When winter enters, U.S. tourism will also enter the traditional off-season. As a result, the demand for employment manpower will no longer be so strong. Jobs in the manufacturing and technology industries are still declining, and technology companies have not shown significant growth. Therefore, the Fed's current "restrictive interest rate" of 5.4% has indeed effectively suppressed economic activity and the resulting inflationary pressure.
In this regard, Wall Street institutions also predict that the U.S. economy will enter recession sooner or later due to the high interest rate environment. Currently, the U.S. economy is only suffering from a delayed recession due to structural changes. Assuming this, energy prices that are sensitive to economic demand will be the first to fall, and the price index will follow the decline, and the U.S. GDP and employment reports will show a sharp slowdown or even a recession as soon as next year. Therefore, the Fed does not need to raise interest rates to accelerate the recession. It is better to maintain the current interest rates and "slowly" observe when the recession will occur. , whether the degree is severe, so as to achieve the soft landing of the Fed's goal.
In the future, the Fed should slowly cut interest rates, but the cycle will be longer. The direction is beneficial to the crypto market. However, investors must be more confident to accept that market fluctuations will continue to wear away their patience. Long-term U.S. bond yields are slowly rising. The rise shows that investors are also revising their interest rate expectations. The cryptocurrency market will always have to wait until a large amount of easing after the economic crisis before it surges. Currently, it takes a long time to enter the market, and the wait may be longer than imagined.
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[MICA RESEARCH] Crypto market trading is sluggish, waiting for the release of the US price index
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