CoinWorld reports:
In recent days, the cryptocurrency market has experienced significant volatility, particularly among altcoins. The price of Bitcoin dropped to the $50,000 range, marking a decrease of approximately 30%. In contrast, many altcoins saw declines of around 80%, with some falling even to levels last seen during the bear market at the end of 2022, when Bitcoin was priced around $16,000. StarEx believes that this pressure may take some time to digest, but dawn will eventually follow darkness.
Key sources of market selling pressure include:
Mt. Gox restitution: Trustees of Mt. Gox announced in early July their intention to begin repaying Bitcoin and Bitcoin Cash, sparking concerns in the market about future selling.
German government liquidation: The German government commenced the liquidation of Bitcoin seized in 2013. In June, they transferred nearly 4,000 Bitcoins to exchanges, with ongoing sales in July, currently holding about 40,000 BTC.
US government sales: On June 26th, the US government transferred 3,940 Bitcoins to Coinbase Prime and has conducted partial sales in July, currently holding around 200,000 BTC.
Bitcoin miner sell-offs: Miners have begun selling Bitcoin to manage financial expenses due to sharp declines in output following halving events.
US Bitcoin ETP outflows: Funds from US Bitcoin spot ETFs have seen significant outflows, with some experiencing capital flight.
The pressure on altcoins is even greater. Despite the bull market of the past six months, funds have actually flowed out of altcoins. With a wave of unlockings, billions of dollars’ worth of tokens are released each month, with VC firms continuously selling these tokens at costs significantly below secondary market prices, sometimes less than 10%.
Several notable features define this cycle of the crypto market:
VC dominance: Mainstream altcoins are often backed by VC investments, boasting market caps in the tens or even hundreds of billions of dollars, yet with small circulating supplies. This favors early control, with many projects using concepts, VC endorsements, and manipulated data to launch at high valuations and then exit at a profit, necessitating a large-scale market washout for healthier conditions.
Enormous derivatives market: The derivatives market has reached levels in the hundreds of billions of dollars, enabling institutions to more easily manipulate markets, either boosting or crashing prices. While Bitcoin may remain relatively stable, sharp declines in altcoins are becoming more commonplace.
“Stock marketization” trend: This bull market has been driven by ETFs, primarily in Bitcoin, with speculative concepts like meme coins and BRC20 tokens interspersed. Most investors have failed to profit, with increased operational difficulty leading to losses.
Possible end of the four-year cycle: The traditional four-year cycle of the crypto market may no longer hold, suggesting past experiences may not be reliable.
StarEx believes the Federal Reserve will eventually engage in quantitative easing again, influenced by factors such as the upcoming US election, clarity on Fed monetary policies, and stock market performance, all of which will significantly impact global financial markets. Currently, the core factors capable of sparking another major bull market in cryptocurrencies are widespread ecosystem prosperity or substantial Fed money printing. Given the current US debt of over $34 trillion, interest rates exceeding 5%, high stock market levels, and similar challenges faced by China and Europe, substantial quantitative easing seems inevitable. A promising future for cryptocurrencies lies ahead.
However, StarEx emphasizes that a bear market does not necessarily mean a continued decline. Following this significant downturn, stabilization and rebounds may occur in the short term. Strategically, they advise dollar-cost averaging, avoiding heavy positions, refraining from borrowing, and waiting for the arrival of a major market uptrend.
