The market is Plummet, will the Halving bull still come?

[TL；DR]

1. In April, the encryption market turned from pump to fall, and "Bitcoin Plummet 290,000 Get Liquidated" once ranked 31st on the hot search list, and market pessimism began to spread.

2. Many observers attribute the reason for the current round of downgrades to the weakening of the dollar's Liquidity easing expectations, the end of Favourable Information speculation in the Bitcoin Halving, and the pressure on risk assets due to the tight geopolitical situation.

3. If we look at it from a more macro perspective, the market is still in the rise stage, and in the long run, the technological innovation and application adoption of the encryption market is still moving forward.

Introduction

The encryption market saw a sharp fall last week, with Bitcoin and Ethereum prices falling slightly fall, while the long altcoin Plummet sharply, and the excitement came to an abrupt end. As the Halving approaches, this article will discuss in depth why the market has been liquidated and lowered one after another, and whether there is a possibility of a bull in the market outlook.

Bitcoin minor, alts big dump

The encryption market ushered in a considerable downward adjustment last week, with "Bitcoin Plummet 290,000 Get Liquidated" once ranked 31st on the hot search list.

Bitcoin experienced its biggest Fluctuation in long months last week, big dump from a high of $72,774 to $60,172, and despite subsequent market Rebound, Bitcoin eventually fall fell by more than 10%.

At the same time, Ethereum also saw an unresisted decline, recording its biggest intraday fall since November 2022, and although the fall narrowed at the close, it was still more than 15%.

According to CoinGecko data, the total market capitalization of Crypto Assets fall from a high of $2,831.4 billion to a low of $2,417.5 billion in the past seven days, an fall of more than 14.6%.

Figure 1 Source: CoinGecko

Looking at the details, longer is the collective blood loss of altcoins, with some tokens having fallen more than 50% from recent highs, and GMX from the last round of Bear Market Light hitting record lows.

According to The Block's data dashboard, the first two weeks of April saw more liquidations in the Ethereum lending market than in any month since June 2022. The liquidation amount of the lending protocol Aave is close to $80 million, and the liquidation amount of Compound is close to $50 million, making up the vast majority of the liquidation long. The last month with a high volume of liquidations was June 2022, a month after the collapse of the $40 billion Terra ecosystem.

The big dump of the Spot market has also triggered the Close Position operation of speculative Crypto Assets positions in many long, derivation huge Fluctuation of the market.

According to Coinglass data, more than $1.55 billion worth of bullish contracts were liquidated within 24 hours of the sharp fall last Friday and Saturday, and more than 297,200 traders got liquidated.

Figure 2 Source: Coinglass

In fact, the downward Fluctuation of the market has long been reflected in the Options related data. Ahead of the upcoming Halving, investors' sentiment began to turn nervous, in contrast to the optimistic expectations of previous indicators.

Figure 3 Source: Amberdata

According to a new report from Kaiko Research, the implied Volatility of Bitcoin Options has climbed significantly over the past week, completely reversing the previous week's decline. Adam McCarthy, an analyst at Kaiko Research, explained that an upside pump implied Volatility often means that market participants have less confidence in price movements. When implied Volatility rise, traders are often willing to pay a higher premium to protect an existing position, or speculate in response to possible price Fluctuation, regardless of whether the Fluctuation is pump or down fall.

Exploring the reasons for the market falling

As for the reasons for the market falling, observers generally analyze it from both macro and micro levels.

From a macro perspective, first of all, the recent economic data released showed that inflationary pressures have risen, making it possible for the Fed to adjust its monetary policy, and this uncertainty has hit market sentiment and led to capital outflows.

Last week's US CPI YoY for March was higher than expected and the previous reading, showing rise inflationary pressures. Based on this data, the market sees a drop probability of a rate cut by the Fed in June, and the Fed is expected to be more likely to keep Intrerest Rate unchanged in the coming months. And US President Joe Biden, although still expecting a rate cut this year, also admitted that the new data may lead to a delay in the rate cut.

Second, geopolitical tensions, especially the escalation of the conflict between Iran and Israel, have sparked market concerns, with investors turning to safe-haven assets and Crypto Assets being left out in the cold.

From a micro point of view, Bitcoin is about to complete the Halving, although the long-term Favourable Information, but in the short term the market has overreacted to this, and altcoins are more vulnerable than mainstream tokens, often becoming the preferred target for capital selling when the market falls.

According to U.S. Spot Bitcoin ETF flows monitored by SoSo Value, net inflows have slowed significantly since March 18, while net outflows have shown signs of accelerating.

Figure 4 Source: SoSo Value

In addition, Bitcoin has completed a 7-month monthly closing pump, which was not seen in the last round of Bull Market, and the current technical indicators also show that the price has been seriously overbought, and there is also a need for adjustment on the technical side.

Figure 5 Source: Gate.io

Of course, if we refer to history, we can also clearly see that when the first three Halving occurs, the market will speculate a wave of small highs before the Halving, and then profit taking causes a short-term minor adjustment, which is also in line with past historical experience.

Bull Market Halving market outlook

Currently, the Crypto Assets market is facing longest challenges. Heightened geopolitical risks have led to turmoil in financial markets, with investors turning to safe-haven assets such as bonds and the US dollar, while risky assets such as Bitcoin have been left out in the cold. Against this background, the market falls slightly and quickly evolved into a full-blown liquidation.

As Chris Newhouse, a Decentralized Finance analyst at Cumberland Labs, said, since all Crypto Assets have a correlation with risky assets, a small falling in prices quickly turned into a full-blown liquidation.

Although Bitcoin has been slightly sluggish recently, and other tokens are gradually eroding the value of investors' accounts, market analysts have observed that although there is momentum to pull higher, the selling momentum is not yet obvious. They speculate that the selling pressure may be coming from the stablecoin market, while some institutions such as BlackRock are still actively buying and going deep into the market.

At present, the general focus of the market is on the Bitcoin Halving incident, which has triggered panic in the market Favourable Information to cash in on the coin change Unfavourable Information, and many long people are worried that the market will usher in a large-scale sell-off.

However, if we look at it from a more macro perspective, the market is still in the rise phase, and in the long run, the technological innovation and application adoption of the encryption market is still moving forward.

For investors, the most important thing at the moment is to remain calm and patient. The market may go through longest selling phases before entering the shock wave phase, which is a window to find quality investment opportunities, not a moment of fear. Long-term holders should have a long-term perspective and not be affected by short-term market fluctuations.

In the face of short-term fluctuations and long-term trends in the market, investors should maintain keen insight and rational judgment. We have also mentioned longing in previous blog posts that investing in Crypto Assets is a long-distance race in itself, and you need to keep learning, accumulating experience, and improving your investment literacy. Only in this way can we go further and more steadily on the road of investment.

by Carl Y.

This article represents the views of the author only and does not constitute any trading advice.

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