In the past week, market fluctuations have been full of drama, with nearly all movements revolving around key macroeconomic data. Firstly, on June 11th, the US non-farm payroll data significantly exceeded expectations, leading to a sharp drop of over 5% in Bitcoin; then, on June 12th, the US CPI data came in 0.1% lower than expected, causing Bitcoin to rebound significantly by over 5%; finally, on June 13th, the Fed’s dot plot showed a rate cut less than market expectations, resulting in Bitcoin plummeting nearly 5% again. Within just three days, the market experienced two roller-coaster situations, leaving many trend traders manipulated by the main players. This phenomenon essentially confirms a point made in a previous article: whether there will be a rate cut in September has become one of the most crucial gaming directions for funds in the second half of the year.
Among the three key macroeconomic trading points, the most surprising market reaction occurred after the inflation data was released on June 12th. Despite the actual Consumer Price Index (CPI) being only 0.1% lower than expected, within a reasonable margin of error, the market still saw this slight difference as a significant positive, indicating that the market’s obsession with macroeconomic data has reached an almost pathological level. The market’s fervor for macroeconomic data also suggests that in the absence of a compelling narrative in the crypto space, the market can only place its hopes for expanding valuation on loose liquidity. Therefore, for leveraged traders, caution is required in the upcoming windows of each macroeconomic data.
Currently, the interest rate swap market shows that market participants expect a 90% likelihood of a 50 basis point rate cut by the Fed this year. However, there is a significant difference of opinion in the market regarding whether the first rate cut will be implemented in September. Over the past week, with a series of macroeconomic data releases, the pricing of a rate cut in September in the swap market has been fluctuating dramatically between 50% and 70%. In this uncertain expectation, if the rate cut is indeed implemented in September, it would not only mean an earlier timing of the easing policy but also indicate that the extent of the easing policy may surpass market expectations (with 2-3 rate cuts). Of course, if the expectations of a rate cut in September are disappointed, the market will react negatively. However, as analyzed in the previous article, it is believed that the rate cut is likely to occur in September, although the market may still undergo a vigorous shakeout before the cut.
Recently, the market has widely discussed the absence of altcoins in the current bull market. However, few analyses have focused on capital flows, exploring why the profitability of altcoins has rapidly declined since 2021. Data from CoinMarketCap and TradingView show that Bitcoin’s market cap increased from $33 billion in January 2023 to $1.4 trillion in 2024, a 324% increase. During the same period, the market cap of altcoins rose from $85 billion to $350 billion, a 3.11% increase. Although Bitcoin has reached new highs in 2021, the market cap of altcoins is close to 85% of the peak in 2021. However, a detailed analysis of the composition of altcoin market cap reveals that out of the $265 billion growth, around $100 billion came from unlocked tokens and $600 billion from new token issuances, with only $105 billion attributed to the increase in token prices. This indicates that over the past year in the bull market, more than half of the monthly inflows into altcoins have been consumed by unlocked old coins and new coin issuances.
According to data from 10x Research and CoinGecko, the unlocking of altcoins in the next six months is expected to reach $20 billion, with monthly new token issuances of nearly $6 billion. This oversupply in the face of limited demand will increasingly worsen the liquidity crisis in the altcoin market. In a situation of scarce resources, expecting a resurgence of the altcoin bull market of 2021 seems unrealistic. Therefore, even if there is an altcoin bull market in the future, it is likely to be a structural rally.
Despite the unlocking and issuance hindering the rise of altcoins, for the blockchain industry that is still in a highly prosperous stage, the $225 billion altcoin market cap remains insignificant. In the future, projects that can be driven by internal growth still have the potential for tenfold or even hundredfold growth. In conclusion, despite market downturns, there are still opportunities to buy high-quality altcoins at low prices.
As the market transitions into a game of existing resources, the power of speech and pricing will gradually concentrate in the hands of groups with sufficient funds. In the current frenzy of altcoins, the biggest winners are undoubtedly private equity (PE) and venture capital (VC) companies. They will continue to utilize their existing profit model: investing in and incubating new projects, then boosting valuations by listing on exchanges to cash out. Therefore, short-term trading opportunities will continue to arise in new or lesser-known coins. In the past month, the second wave of rallies for Binance’s new coins in BB, NOT, and IO, confirms this pattern, with ZK likely to follow suit.
