People in the cryptocurrency circle have their own 618 moment. After a week of downturn, the market experienced another earthquake on June 18th. In the early hours, Bitcoin broke through the market support price of $65,000, and Ethereum followed suit, dropping below $3,400, with a 6.23% decline in 24 hours. The king of MEME tokens, SOL, also struggled, dropping to $127.22 USDT at one point, a 10.98% decrease.
While mainstream coins are still struggling, altcoins are facing even more challenges. Altcoins are generally experiencing a “plunge” trend, with most of them seeing a decline of over 20%. The newly launched ZK token dropped below $0.2 USDT, a decrease of over 36%. According to Coinglass data, as of 2 p.m. yesterday, the total liquidation across the network amounted to $318 million in 24 hours, with most of the liquidations occurring in long positions, exceeding $270 million. As a result, the cryptocurrency market cap also shrunk again, dropping to as low as $2.46 trillion.
Although Bitcoin has recovered above $65,000 today, the market sentiment remains pessimistic given the recent trends. Just a few months ago, the general consensus in the market was that Bitcoin would reach $100,000 by the end of the year, signaling the start of a bullish market. This begs the question – what has changed?
Analyzing the recent downturn in Bitcoin, the root cause seems to be insufficient liquidity. The core factor that propelled Bitcoin’s rise was undoubtedly the Bitcoin spot ETF. The rapid influx of institutional funds led to a surge in demand for Bitcoin, driving its price from $40,000 to $73,000 and establishing crucial support for the consensus. However, this consensus has recently faced a backlash. From June 10th to June 17th, Bitcoin ETFs have been experiencing net outflows, with outflows totaling $810 million in the past week, leading to a gradual decline in institutional buying momentum.
The decreasing turnover rate and declining exchange balances for Bitcoin further indicate the liquidity issues in the market. Despite these challenges, the $65,000-$69,000 range remains the area where most BTC investors enter the market. This range is where Bitcoin is more likely to see holders reluctant to sell, providing some value support. The changing composition of holders, with high-net-worth individuals entering the market, suggests that short-term gains may not be the primary factor influencing selling decisions, indicating that the current market fluctuations may continue.
Bitcoin has institutional support, but other cryptocurrencies are not as fortunate. In the traditional bull market cycle, assets typically flow from high-stability assets to low-stability assets, from low-yield sources to high-yield preferences, moving from mainstream coins to altcoins, MEME coins, and other sectors. However, this cycle seems to have deviated from the usual path this year.
The organic liquidity effect of this bull market has led to a significant influx of liquidity into the Bitcoin ecosystem, but this new money from institutions has not spilled over into other areas. The lack of strong applications emerging from public blockchain ecosystems has resulted in poor performance for value coins, with MEME coins outshining them.
The debate surrounding VC tokens this year has exacerbated the situation further. Linear unlocking of VC tokens has led to increased selling pressure, with a significant number of tokens left unsold after the unlocking period, making retail investors the victims of liquidity issues. The lack of innovation in applications, mismatched supply and demand, and restricted liquidity have resulted in a dismal performance for altcoins since March.
Despite the bearish sentiment, institutions generally believe in a long-term bullish outlook for Bitcoin. QCP Capital, Bitfinex, and 10x all emphasize that BTC will continue to rise, with a consensus target of $80,000-$120,000 by the end of the year. Whales seem to share this view, with reports of whales selling call options at $70,000 by the end of July and entering call options at $70,000 by the end of the year, totaling 100 BTC and paying $883,000, indicating a relatively negative short-term attitude towards price signals.
For altcoins, the controversy is more pronounced. Quinn Thompson, founder of the crypto hedge fund Lekker Capital, suggests that given the current high leverage, open interest, lack of panic buying, and stagnant stablecoin supply, the best course of action is to avoid buying altcoins. However, Andrei Grachev, co-founder of DWF Labs, believes that as long as Bitcoin remains stable, the next few months could see a rally in altcoins.
In conclusion, the current market shows a rather boring trend, with caution being key for investors. It’s a time where both projects and investors are feeling the pressure, and rushing into decisions may not be wise.
