Firework Essay: Is the fall after the rise of the currency circle inevitable? Why? When will it stabilize?
Xinhuo directly stated the conclusion that the fall of the currency circle after each round of hitting the previous high is inevitable. Take bitcoin as an example, "dancing at the peak" can probably be used to describe this wave of bitcoin's market that has repeatedly set new highs and fluctuated sharply. It climbed to a new level of 60,000 US dollars for the first time on the weekend, reaching 61,800 US dollars at one point. When the market was trying to understand the psychological price of $60,000, similar shocks were repeated, and Bitcoin once again fell from its high point, once touching the $53,000 mark.
Past cases tell us that every round of shocks will not stabilize so quickly. In fact, a new round of diving is hidden under the seemingly stable background. The main players using this method to control the market are becoming more and more proficient up. So at present, it seems that this round of small adjustments of Bitcoin should last for 1-2 trading days before re-opening the rising mode and breaking through the previous high is necessary. Let's look at the analysis of salary.
Changes in the rhythm of institutional players' advance and retreat
Bitcoin has risen by more than 100% this year, nearly 20 times higher than the same period last year. Looking back on this journey, Bitcoin is performing a similar "roller coaster" plot.
On March 14, when most financial trading institutions were resting, shortly after breaking through the $59,000 mark, Bitcoin crossed the psychological price of $60,000 and touched $61,800 within a day, with a total market value of over $1.1 trillion, exceeding the total market value of global cryptocurrencies 60% of.
But this new high appears to be short-lived.
On March 15, the price of Bitcoin fell from its high point, crashing by $5,000, and returning to the $55,000 mark. This was followed by another drop below $54,000 on March 16. According to the combing of public information, the market value of Bitcoin fell by 4.674 billion US dollars within 24 hours, and more than 130,000 people broke their positions in 24 hours.
It is normal to draw back sharply in a bull market. "Taking stocks as an example, if they fall by 20% from the highest point, it can be called a technical correction. Bitcoin has fallen from the trading price of $58,000 per coin in early February to around $40,000, which is a big retracement , and this drop can also be understood as a technical retracement or volatility.”
The decline of Bitcoin has always been determined by a variety of factors. According to the purely rational market logic, Bitcoin will rise a little every day due to its characteristics, but in reality, Bitcoin cannot maintain its upward trend all the time, and the market will always be a long-short game, but overall, large fluctuations are generally All are caused by the advance and retreat of large institutions and large funds.
So, what subtle long-short logic is behind this wave of market prices?
In Xinhuo's view, although the push of Bitcoin to around $60,000 was caused by multiple factors, it has little to do with retail or individual investors. Only the institutional investor Hdu bought tens of billions of dollars in bitcoin, which is not a trend that individual investors can control.
As Bitcoin continues to soar to new highs, at the end of last year, after a number of world-renowned financial institutions successively occupied a dominant position in the Bitcoin field, the proportion of funds between individual investors and institutions has continued to balance, and the two may be expected to compete face to face . According to the latest data from JP Morgan Chase, the inflow of retail funds in Bitcoin in the first quarter of this year is expected to exceed that of institutions.
Retail funds advance and retreat bravely
So far, the attention and recognition of Bitcoin by large and small institutions is still gradually increasing, and they continue to enter the market, and occasionally increase their holdings. Funds continue to flow into the Bitcoin market, but they have already appeared cautious, while retail funds have shown bravery.
Against the backdrop of rising global inflation expectations, both institutional investors and small and medium-sized investors are buying Bitcoin. In the past, at least until this autumn, the tone of global economic recovery and loose monetary policy will still not change significantly. In particular, the fiscal policies of countries such as Europe and the United States that directly distribute cash subsidies to the public will only make more small and medium investors flock to the market. into the bitcoin market.
But even if more retail investors enter Bitcoin, there is still a long way to go compared with the continuous large-scale accumulation of institutions.
The main reason is that institutions are increasing their holdings of Bitcoin, but in fact, the number of Bitcoins that institutions buy at this time has shrunk. From Xinhuo’s point of view, apart from Grayscale, most institutions today do not buy more than 1% of their assets under management for real money in Bitcoin. Institutions have not significantly increased their positions in Bitcoin, but as long as they continue to increase their positions slightly, the price of Bitcoin will continue to rise.
But at the same time, compared with individual investors, large and small institutions tend to pay more attention to and be sensitive to the direction of the wind, because countries have not yet issued strict and clear regulations, and Bitcoin has generally shown an upward trend. However, if the United States or other countries actually introduce regulatory policies for cryptocurrencies such as Bitcoin, this wave of market prices is likely to be halved or evaporated. Presumably this is also the reason why some large institutions hesitate to move forward.
