In the cryptocurrency market in June, three major risks cannot be ignored

After the rebound last night, Bitcoin has the momentum to hit $10,000 again. Can it successfully break through the strong pressure range this time and establish a new market after halving? There is only one week until the end of June, but the market's own risks are intensifying, which deserves everyone's attention.

1. The risks behind the hype of assets in Ethereum DeFi projects.

According to DeFiMarketCap data, the total market value of the top 100 DeFi tokens by market value has exceeded 6.6 billion US dollars, of which Compound has a market value of 3.4 billion US dollars, accounting for more than 50%. The warehouse is worth $486 million.

At the same time, due to the high demand for borrowing cryptocurrencies and the incentives implemented by many DeFi protocols, some Ethereum users have seen stablecoin yields (annualized yields) exceed 100% in the past week.

To sum up: the total market value of Ethereum DeFi tokens and the total value of locked assets have increased significantly in recent weeks, and the annualized rate of return of users has soared.

This is a positive factor for the development of Ethereum and DeFi, but it is not healthy. It is much higher than the annualized rate of return of the centralized platform. On the one hand, it shows that the liquidity of DeFi-related loan products is weak, and there is a situation of false speculation. If the liquidity is sufficient, the annualized rate of return should remain stable.

On the other hand, it shows that speculation is very strong, especially the recently popular Compand project, which is playing the model of "borrowing and mining". Funds enter it, and more token rewards are obtained through serial mortgages and loans, but this contains huge risks.

Once DeFi loans and mortgages face liquidation due to sharp fluctuations (falls) in cryptocurrency market prices, there may be a risk of serial liquidation. This happened in the MakerDao project at the time of the 3.12 catastrophe. A large number of mortgage debt positions fell below the liquidation threshold and triggered system liquidation. The serial liquidation of BitShares (BTS) in the past few years was also a painful experience. Investors’ savings Once turned into nothing.

Another is the risk of smart contract vulnerabilities in lending protocols. Because it is a decentralized protocol, it is completely driven by smart contracts and lacks the necessary audit and risk control. Once a hacker finds a loophole to attack, the user's asset loss cannot be avoided, especially when the DeFi concept is becoming more and more popular, its influence will only be greater. You can refer to the several coin theft incidents in major exchanges such as Binance and Bithumb in the past one or two years. After the occurrence, they all caused huge panic and turmoil in the encryption market, and the price of the currency fell sharply, affecting innocent people.

2. Bitcoin options hit a new high, facing settlement at the end of June

According to AMBCrypto, a large number of contracts in the Bitcoin options market will expire on June 26 (171,000 contracts, totaling about $1.6 billion), while the total open interest has increased by more than 10 times since mid-May, which shows that Institutional investor demand for Bitcoin options is growing rapidly.

The outstanding option contracts worth more than one billion US dollars are due to expire. For the current bleak cryptocurrency market, the amount of funds is still huge. The delivery of this part of the expiring contract makes it possible for traders to hoard BTC Spot, or conduct derivatives trading operations such as contracts to hedge the risk of delivery, and these actions may have an impact on the overall market conditions and cause fluctuations in the broader market.

A typical case in this regard is the BTC contract market at the beginning of the year. Due to the stimulus of the halving market, investors frantically borrowed USDT and increased leverage operations. The contract positions once accumulated to more than 12 million contracts, a record high.

Everyone knows the subsequent story. The continuous circuit breaker of U.S. stocks and negative oil prices caused a series of liquidation in the currency market. The contract volume fell by 70% in a short period of time. The halving market was terminated, and investors’ dreams of halving were also shattered.

3. Bitcoin continues to hover at a high level + the risk of a second dip in US stocks

Bitcoin has been consolidating in the range of 8,500-10,000 US dollars since May, and has been in the range of 8,500-10,000 US dollars for nearly 2 months, continuing the high-level consolidation trend after the halving market, without choosing a direction.

The reason why it has stayed at a high level for so long is because after the concept of halving, there are no new concepts or hot spots in the market, and there are factors that can cause market reversals, and the market lacks momentum to push the market to continue to go up.

Another is the issue of investor confidence. After the previous 3.12 Great Falls incident, investors in the market were further lost, market sentiment continued to be depressed, and the number of new funds entering the market was too scarce, which also led to the reason why the spot market fell into a slump within a few months. At this stage, the contract market has become the main battlefield of the game of stock funds. For most players in the currency circle, the risk and threshold of the contract are much higher than that of the spot market. After several attempts to get out of the market, I have become less and less confident about the currency market.

In the absence of hot spots and confidence in the encryption market, contract manipulation is obvious. In the absence of motivation to break through in the market, it will maintain a high degree of volatility in sync with the U.S. stock market, because the financial market is originally one.

Charles Edwards, head of digital asset management company Capriole Investments, said, "Since June 10, Bitcoin has re-correlated with the S&P 500 trend, and the correlation is at an all-time high. High fear and uncertainty (such as VIX) = high Correlation.” There is a view that more and more institutions have entered the market and added cryptocurrencies to their portfolio trading systems, which has triggered an increasingly close relationship between digital currencies and traditional markets.

This synchronous correlation between the market trend of Bitcoin and the U.S. stock market will be affected by the fluctuation of the U.S. stock market. The U.S. stock Dow Jones Index has experienced a round of deep-V rebound from February to the present. The decline is due to the outbreak of the epidemic and the increase in economic uncertainty.

However, the current risk has not been completely lifted. The number of people affected by the epidemic in the United States is still increasing by tens of thousands every day. The deep V rebound of the stock market is more like man-made manipulation. At this stage, it is facing the suppression of the 250-day line, and it has reached a new selection node. No one can give an answer on how it will go in the future. It can only take one step at a time.

Back to the market, Bitcoin stopped falling at 9,300 US dollars yesterday, and the subsequent rebound was a weak rebound, and the volume energy was not significantly enlarged. When hitting 9500 and 9600 US dollars in the early morning, the volume can be enlarged simultaneously, which means that the bulls have kinetic energy to attack, and the main force is involved. At present, it is seen that after the impact of 9,800 US dollars, it will retreat, and it will shrink and consolidate in the range of 9,600-9,700 US dollars to digest the previous gains. If the support of USD 9,600 is not broken within a few days, there is a high probability that it will continue to attack and hit USD 10,000 again. Breaking through 9600 US dollars, the rebound risk of being terminated.

From the perspective of the overall volume-price relationship, this rebound is not a strong rebound, and there are no other news, policy, fundamentals and other factors to promote it, which means that the height of the rebound is limited, and 10,000-10,300 US dollars is still a strong pressure range in the near future. On the whole, we should still look at the volatile market in a large range, a rebound at a low level.

The market rebound this time was driven by ETH. ETH’s heavy-volume positive line yesterday morning broke through the recent pressure of $232, and then continued to rebound, causing the overall market to rebound.

However, in the early hours of this morning, after ETH hit $240, it did not rise further. Instead, BTC started a second rebound within the same period of time, which means that the follow-up kinetic energy of ETH is weak.

Judging from the 4-hour level trend chart, ETH is facing a strong pressure range of 245-250 US dollars, and there is a lot of pressure. It is impossible to break through smoothly only by the current volume. Next, look at the rebound volume and energy of this range to judge the difficulty of the breakthrough. If the breakthrough cannot be made for a long time, it is possible that it will fall for a long time.