Bitcoin will usher in a new round of major breakthroughs

Source: Coin Market Trader

Although Bitcoin has re-broken through the $60,000 mark, the recovery of bullish sentiment in the market has been very slow. During the rapid rebound of Bitcoin, the funding rate of perpetual contracts continued to be negative, and the put/call ratio in the options market also rose from 1.37 to 1.45. This shows that most investors are still cautious about the rebound and are always on guard against the arrival of a second bottom. However, it should be emphasized that from a technical analysis perspective, Bitcoin's breakthrough of $60,000 actually has the conditions for a reversal.

In this round of market, the $60,000 mark has always been regarded as the lifeline of the bull market. There are two main reasons: First, $60,000 is the top area of ​​the previous bull market and the neckline of the current technical pattern. Standing above $60,000 shows that the breakthrough of the big cycle is still valid; Second, in this round of bull market, the turnover rate of Bitcoin above $60,000 is as high as 375%. The cost of active investors in the market is basically concentrated in this area. Maintaining it above $60,000 is conducive to maintaining the offensive vitality of bulls. Since February 2024, every time Bitcoin falls below $60,000, it will trigger a retaliatory rebound, and this adjustment is no exception, which shows that Bitcoin bulls still have the ability to defend and counterattack. Therefore, regardless of whether the second bottoming out occurs, the medium- and long-term upward trend of Bitcoin remains unchanged.

From the perspective of market performance, the most positive signal of this round of rebound is that the blood-sucking effect of Bitcoin is gradually weakening, and the exchange rate of ETH against BTC has begun to bottom out and rebound. Although the strengthening of the ETH\BTC exchange rate may still be a phased convergence of the scissors gap between the two trends. But it is worth noting that the last time the ETH/BTC exchange rate turned a corner was after the plunge on March 12, and the situation at that time was also very similar to the current situation.

First, the rapid decline in ETH prices caused leverage to be quickly cleared in a short period of time. According to data from DeFiLama and Coinglass, the single-day liquidation scale of ETH futures and on-chain pledges on August 5 reached US$1.04 billion, which was the second largest liquidation event in history after the 5.19 plunge. Although the severity did not reach the level of 3.12 (70% of the leverage was liquidated), it was close to the limit in 4 years.

Secondly, the on-chain activities in both periods fell into a periodic freezing point. In 2019, Ethereum was seen as a public chain with almost no other application scenarios except for issuing coins, while Ethereum is currently considered to be stagnant in innovation and gradually declining. At the same time, the median GAS fee of Ethereum in December 2019 hit a new low in the past five years, and the median GAS fee in August 2024 also set a new low in the past four years.

Finally, the two increases in the ETH/BTC exchange rate occurred in the interest rate cut cycle. The notable feature of this period is the increase in market risk appetite, and funds gradually shifted from absolute value to investment seeking price elasticity.

In short, whether it is the chip structure, fundamentals, or liquidity environment, the current stage is undoubtedly the most likely stage for the ETH/BTC exchange rate to turn around.

Last week, after the Bank of Japan made capitulation remarks, the main debate in the market turned to whether the US economy will face a hard landing. A soft landing refers to a mild economic slowdown that avoids a severe recession, while a hard landing means a sharp slowdown that leads to a severe recession. In essence, loose monetary policy aims to support economic growth through credit expansion, and the premise for credit expansion is that society's long-term confidence in the economy has not been destroyed. Once society forms a general expectation of a recession, simple interest rate cuts will not be able to save the economic situation. For example, Japan in the past and China now have continued to shrink economic activity despite falling long-term interest rates. Therefore, the current cooling of the US job market and inflation too quickly will trigger market concerns about a hard landing of the US economy.

In the past, bad news on the macro level was seen as good news for the market, but now, bad news on the macro level has also become bad news for the market. Therefore, the most ideal situation at present is that the employment data and inflation data will cool down moderately. However, many people did not see the changes in the market and mistakenly regarded the US CPI on August 14 as negative (the decline was too slow), which triggered a rapid intraday dive in the US stock and crypto markets. But the author believes that this wrong reaction will soon be corrected by the market.

In terms of operation, Bitcoin has experienced a week of shock consolidation near $60,000, and the phased wash is nearing its end. It is expected that a new round of rise will challenge $73,000. In the previous cycle, altcoins entered the bull market 2-3 weeks after the inflection point of the ETH\BTC exchange rate. If this rule applies to the present, the performance of altcoins will not be too bad.

In terms of operation, considering that the macro risks have not been completely cleared, Bitcoin will continue to fluctuate and bottom in the short term, and it is not ruled out that it will continue to test the 55,000 area this week. On the market, the surge in XRP has led to a counterattack in altcoins. Many altcoins have rebounded by more than 30%. It is expected that the fermentation of the altcoin market will continue. "