Crypto market encounters obstacles, multiple factors influence future trends.

The crypto market in July failed to rebound as expected and instead continued to decline under the influence of multiple negative factors. Events such as creditor payouts from a trading platform and government sell-offs in a certain country triggered panic among investors, causing Bitcoin prices to fall below important support levels, leading to a comprehensive drop in the entire crypto market. Nevertheless, there are still several potential positive factors in the market, including large-scale repayment plans, expectations of interest rate cuts, and the U.S. elections, which may bring opportunities for a turnaround in the fourth quarter of 2024.

Current Major Bearish Factors

creditor compensation triggered market turmoil

The creditor compensation issue of a certain trading platform has aroused high market attention. The potential selling pressure of approximately 142,000 BTC and 143,000 BCH once triggered market panic, causing the BTC price to drop to around 60,000 dollars.

With the compensation officially launched, BTC has broken below the support level of $60,000 under huge selling pressure. During this period, BTC miners showed signs of capitulation, which usually indicates that the price has bottomed out. The last similar hash rate decline occurred in 2022, when the trading price of Bitcoin was $17,000.

Some analysts believe that most market participants have underestimated the severity of the potential decline in Bitcoin's four-month volatility range. The closest similar situation was in May 2021, when Bitcoin and other cryptocurrencies also experienced a parabolic rise. Currently, crypto market leverage is near historical highs ( excluding CME ), but the range has been longer and extreme liquidation has not yet occurred.

The originally estimated low point of $50,000 may be too conservative, and a more extreme pullback to the $40,000 range cannot be ruled out. Such a pullback could have a significant impact on the market and may require several months of consolidation/downward trend ( recovery period ) before an upward reversal could occur.

The government of a certain country sold off nearly half of its holdings.

Recently, a certain country's government transferred over 10,000 bitcoins in batches to exchanges and market makers, causing the price of bitcoin to temporarily drop below $55,000. However, data shows that the government subsequently recovered 2,898 bitcoins, approximately worth $163 million.

Data shows that the government's sell-off plan has been nearly halfway completed. Since starting the sell-off last month, its Bitcoin holdings have decreased from nearly 50,000 to 27,461, with the current holdings valued at approximately 1.5 billion USD.

Despite the market decline, digital asset investment products still recorded a net inflow of $441 million last week. Among them, Bitcoin investment products accounted for 90% of the total inflow of crypto products $139.8 million. By region, the United States contributed $384 million in inflows, followed by Hong Kong $32 million, Switzerland $24 million, and Canada $12 million, while a certain country experienced an outflow of $23 million.

( The Bitcoin mining market is struggling to find a bottom.

Recently, the price of Bitcoin fell to $54,000 ) and has now risen to $57,000 (, which is a further blow to miners whose profits have plummeted due to the halving. Surveys show that if the price of Bitcoin drops to $54,000, only ASIC miners with efficiency over 23W/T can be profitable, and only a few models can barely maintain.

The selling behavior of miners is also seen as part of the reason for the recent price drop. In response to cash flow issues after the halving, mining companies have continued to sell, with 30,000 bitcoins from miners entering the market in June alone.

Based on an estimated energy cost of $0.07 per kilowatt-hour, only ASIC miners with a unit power of 26 W/T or lower can be profitable when the price of Bitcoin is $54,000. Specifically, some models of miners can only break even within a price range of $39,581 to $54,424.

In this context, as the craze for inscriptions fades, mining companies are choosing to sell Bitcoin to survive.

Fortunately, as the price of Bitcoin declines, small and medium-sized mining farms are gradually shutting down, and the difficulty of Bitcoin mining is rapidly decreasing, which may signal the end of miners' capitulation. On July 9, data showed that the difficulty of Bitcoin mining was adjusted down by 5% to 79.5T, with an average hash rate of 586.72EH/s over the past week. Since May, the amount of Bitcoin sent to exchanges for sale by miners has significantly decreased, and over-the-counter trading volume has noticeably dropped. On June 29, the total trading volume at over-the-counter trading desks of mining companies had been exhausted, indicating that selling pressure has eased.

Overall, the price fluctuations of Bitcoin have had a significant impact on the survival of miners, but as the market adjusts, the miners' selling behavior is gradually decreasing, and the industry may welcome a new balance.

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Positive Factors Worth Noting

) The large-scale repayment plan is expected to drive the market to new highs.

A trading platform's revised reorganization plan and disclosure statement submitted to the bankruptcy court in Delaware, USA, in May this year, indicated that it expects to have a total value of assets collected and converted to cash available for distribution between $14.5 billion and $16.3 billion, exceeding the $11 billion owed to customers and other non-government creditors. The surplus cash will be used to pay interest to the company's more than 2 million customers.

Currently, the platform has obtained court approval, and creditors can choose to vote on the compensation plan for encryption in cash or in kind. Creditors must vote by August 16, and the judge will decide whether to approve the plan on October 7. Once approved, the platform will repay creditors within two months, with an expected timeframe from Q4 2024 to Q1 2025.

Although the final compensation method has not yet been determined, some analysts believe that, given that most clients are cryptocurrency enthusiasts, this fund of up to $16 billion will enter the crypto market and become a major catalyst for price increases. Bitcoin is expected to break $120,000, Ethereum will break $12,000, and other cryptocurrencies may rise by 10 to 50 times.

( The expectations for interest rate cuts are clear.

The Federal Reserve's decisions on interest rate hikes and cuts are one of the important factors influencing Bitcoin prices, and rate cuts usually drive the market stronger.

Recently, the Chairman of the Federal Reserve stated that inflationary pressures in the United States have eased, but more data is needed to prove that the inflation risks have passed before deciding to cut interest rates. If rates are cut too early, inflation may rise again; if rates are cut too late, it could lead to a slowdown in economic growth or even trigger a recession.

Although the timing of interest rate cuts is still uncertain, as the latest economic data from the United States shows a slowdown in economic growth, such as a significant downward revision of the June non-farm payroll data and an unemployment rate rising to 4.1%, the highest since November 2021, market expectations for interest rate cuts are heating up. According to the interest rate observation tool, as of July 9, the market expects the probability of the Federal Reserve cutting rates at the September meeting to rise to 73.6%, while the probability of maintaining the current rate is 22.9%.

) encryption accounting system will soon take effect

In December last year, the Financial Accounting Standards Board in the United States announced the first edition of accounting rules for encryption digital currencies, requiring companies holding Bitcoin or Ethereum to record their value changes at fair value and reflect them in net income. The new rules will take effect for fiscal years beginning after December 15, 2024, and will apply to both listed and non-listed companies for the 2025 fiscal year.

For crypto assets, this change in accounting standards means that relevant companies will be able to record the highs and lows of their cryptocurrency holdings. This will drive further compliance in the crypto market and attract liquidity injections from mainstream financial markets.

Bitcoin Price Trends After Each Halving

The market trends can be categorized into three types: upward, downward, and sideways. Regardless of how the future market conditions change, they ultimately cannot escape these three patterns. If the market moves in a certain direction, we need to make appropriate preparations.

If the market breaks through the current resistance level and stabilizes above 69000 points, it can be seen as the beginning of a bullish trend.

Two possible scenarios for an increase:

1. Approaching previous highs but not breaking through: The market may be close to previous highs but has failed to break through, or it has only slightly broken through and then fallen back. At this time, do not be misled by market illusions, and do not chase the highs. Consider reducing some positions, especially when holdings are too heavy.

2. Breakthrough previous highs and maintain new highs: If the market breaks through previous highs and maintains new highs for at least more than 3 days. At this time, pay attention to the strength of the breakout, and observe whether there is a strong rise or a volatile upward movement within 3 days to 1 week. If the momentum is strong and there is a rapid rise after the breakout, you can hold your position and wait for a significant pullback of at least 10% before increasing your position. If the momentum is weak and the rise is slow, it is recommended to reduce your position at the new highs to guard against false breakouts.

At present, the possibility of continuing to rise is relatively low. If the second scenario occurs and the trend is not strong enough after the breakout, one must be wary of the risk of a significant decline.

Reference for market trends before and after previous halvings:

Second Halving ###2016.07.10(

Before this halving, Bitcoin surged 78% within a month. After the halving benefits were realized, it experienced a deep pullback, dropping 30% within a week, with a maximum decline of 40%. It then began to rise, going from under $500 to nearly $20,000. After the halving, the price adjusted down by 30%.

Third Halving )2020.05.12(

In 2020, the market experienced a significant decline before the halving due to special events. If this factor is not considered, Bitcoin also saw a 20% pullback in the week leading up to the halving. There was a slight rebound after the halving, but it did not rise significantly, and the market underwent fluctuations. From the high point before the halving in early May, it only broke upwards by the end of July, fluctuating for 3 months during which there were two pullbacks of over 10%.

From the previous two halvings, it can be seen that Bitcoin tends to experience pullbacks before and after the halving. Although the market generally expects that there will be an increase after this halving, the actual situation still needs further observation.

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