Title: Bitcoin Market Analysis: Key Factors Influencing the Next Phase
Introduction:
Following the recent market downturn in the crypto industry, prominent research firm 10X Research has released its latest analysis on the Bitcoin market. Taking into account recent developments such as Bitcoin ETFs, miner sell-offs, and early Bitcoin holder sell-offs, 10X Research provides price predictions for the next phase of the market, with the realization of these predictions potentially determining the market’s future direction.
The Importance of the Four-Year Cycle and Supply-Circulation Model in Price Predictions:
The four-year predictive parabolic cycle is crucial in estimating Bitcoin prices and serves as the basis for 95% of cryptocurrency predictions. While this model is often exaggerated, suggesting an infinite rise in Bitcoin’s value, another key tool is the supply-circulation model, which predicts Bitcoin’s infinite value by emphasizing the reduction in supply.
Bitcoin Price Predictions:
As is customary, most experts this year still predict that Bitcoin prices will reach new highs, ranging from $100,000 to $150,000 or even higher. Technological innovations and human psychology, particularly the interplay of greed and fear, are the key catalysts in the cyclical nature of the cryptocurrency market. However, the market essentially operates as a momentum game, with most participants actively driving prices up and maintaining a bullish stance. This self-fulfilling prophecy emphasizes the need to seize upward momentum when opportunities arise and also suggests the possibility of more cycles in the future.
Valuation Based on Bitcoin’s Utility Value and Cash Flow:
The discussion on Bitcoin should also address its valuation based on practical utility and cash flow foundations. Unlike other assets, Bitcoin is similar to gold when valued based on production cost curves. However, over time, the psychology of buying Bitcoin becomes more complex, as purchasing one Bitcoin at a high price, such as $70,000, may seem less attractive than buying billions of cryptocurrencies for $100 each. Meme coins have capitalized on this psychology, and companies have achieved the same goal through stock splits.
Sell-Offs by Three Major Groups: Hedge Fund Arbitrage Opportunities Possibly Disappearing:
Although the current market structure is not entirely bullish, our prediction three weeks ago was that Bitcoin would attempt to break through the $70,000 price level based on the belief that a parabolic rise typically follows reaching a new all-time high. However, when this breakthrough failed, risk management became crucial. At that time, we estimated that lower inflation data would act as a catalyst for Bitcoin’s price increase, and this turned out to be true, but Bitcoin faced significant sell-offs.
Firstly, contrary to the positive buying of Bitcoin ETFs due to previous inflation changes, Bitcoin ETFs sold $1 billion worth of assets in the past eight trading days. Secondly, off-exchange sales by Bitcoin miners reached their highest daily trading volume since March, with over 3,200 Bitcoin sold in a single day. Listed mining companies hold a 3% market share but sold 8,000 Bitcoin in May (June data has not been released yet, but miner sell-offs have significantly increased). Bitcoin reserves of miners decreased from $129 billion on June 5th to $118 billion currently. Lastly, early Bitcoin holders sold $1.2 billion worth of Bitcoin.
These three groups seemed satisfied with selling Bitcoin at prices above $70,000. We estimate that the average entry price for Bitcoin ETFs is between $60,000 and $61,000, and a return to this level could trigger a wave of liquidation. When Bitcoin fell to $56,500 on May 2nd, BlackRock issued a statement saying that sovereign wealth funds and pension funds were about to enter the market. This partially prevented further Bitcoin price decline. However, BlackRock now states that 80% of the purchases for their Bitcoin ETF, IBIT, come from retail investors rather than institutions.
Key Levels: Holding at $61,000 and $65,000?
Trading is always a risk-reward game, and we previously pointed out on June 3rd that if Bitcoin failed to reach a new all-time high in June, excessive ETH futures positions would face associated risks. Since the approval of the 19b-4 document by the US Securities and Exchange Commission (SEC) on May 23rd, leveraged futures traders have been the major, if not the only, buyers. Their inflows pushed Bitcoin back to the top of the range, along with lower inflation data, resulting in a risk/reward ratio favoring a Bitcoin breakout.
Lower inflation data, the US election, and a rebound in US stocks are non-crypto market catalysts supporting a price increase later this year. However, without further increases in stablecoin issuance, Bitcoin ETF inflows, futures leverage, or other liquidity (market structure) indicators, Bitcoin bulls may miss out on upward opportunities.
Every time a price breakout attempt fails or Bitcoin retraces below the previous cycle’s high (with $68,300 as the dividing line), we need to redefine a level for risk management of positions. In previous cycles, the 21-week dynamic moving average of $61,000 has to some extent avoided larger pullbacks. Another key level is $65,000, the midpoint of the price range during the consolidation period of the past three months, which may indicate the formation of a larger cycle top.
Conclusion:
Instead of blindly believing baseless claims, we rely more on the information reflected in the data. From the perspective of the number of market participants, including early holders, Bitcoin ETF buyers, miners, stablecoin issuers, etc., not significantly increasing, the current market situation is concerning. Therefore, everyone needs to assess their risk tolerance individually. By combining risk management and data analysis, traders can stay in the game. As an old trader once told us 15 years ago, “The market opens every day,” which means there will always be another opportunity, another cycle.