MVC August 2023 report: When the glass in front of you is half filled with water
2023.8.20 The comrades who sent you on the road are indeed conducting a multi-kill callback as expected.
Market Overview and Industry Trends
Overall, the past month has been very dull and boring. Since June, influenced by the ETF event, the market's consensus bullish expectations have greatly increased. BTC has achieved unprecedented chip accumulation around $29,500-$30,000. In order to speculate on the ETF approval event in August, the bulls once again heavily increased their positions from August 3rd to 8th. In addition to the sharp increase in the number of open positions on the entire network to a yearly high, the BTC contract's funding rate and premium also increased significantly. This is the first time since February this year that both have significantly turned positive, indicating a surge in bullish sentiment with a large number of longs strategically positioning themselves for the ETF approval.
However, regardless of how bullish the market sentiment is and how concentrated the long positions are, due to the increasingly thin liquidity in the market, it has been difficult for the market to sustain an upward movement due to the lack of incremental funds. The downward direction is the path of least resistance. It is unnecessary to provide examples from a data perspective to illustrate the thin liquidity in the market. Simply reviewing the coins that have performed slightly in the past month can be observed that it seems that only one player, DWF, has been active in the secondary market, creating a negative fee rate explosive shorting trend. The reason for such a trend is simply because the liquidity in the spot trading order book is much worse than that in the contract order book, allowing for the manipulation of an upward trend with a negative contract fee rate. Due to the high volatility and expensive fees, those who actually operate in such a market will find that whether it is going long or short, most positions will be liquidated.
In fact, veterans who have experienced the market in 2019 will find this scene quite familiar. In the second half of 2019, both market liquidity and sentiment were bleak, and exchanges often randomly launched blind boxes with daily gains of more than 40% to create an active atmosphere. The occurrence of such signs in the market also indicates that liquidity has basically deteriorated to a certain level. Returning to the main trend of the market, Bitcoin futures delays combined with Musk's selling of coins caused a sharp drop in the market on August 17th, resulting in a large number of long positions being liquidated. According to data platforms, the total number of liquidations on that day was close to the level of the FTX bankruptcy event, and most of the long positions that speculated on the ETF event were liquidated in advance.
This year, the lowest point for open contracts on the entire network in May was around 10.89B. After this round of washing out, it dropped to 11.16B, which is just a step away from the lowest point of 8.77B in March this year. Overall, it has achieved a good washing out effect on the consensus expectation of the bulls. From the current price level, since June, the cost of buying in by the bulls in the ETF event is roughly above 27,000, and the current market price is around 26,000 US dollars. All the bulls have been trapped, and due to the concentration of long positions around 29,000-30,000, it is foreseeable that the long side of the spot market will continue to collapse, and the probability of a multi-kill multi-clearance will continue unless there is a sustained washing-out, the market is unlikely to have an upward turning point.
In the short term, after the concentrated explosion of long positions on August 17th, the market is currently severely oversold, trading volume has significantly reduced, contract fees are deeply negative, and it is close to the peak level of short selling sentiment in May. Moreover, the bulls generally have a strong reluctance to sell, so a short-term rebound can still be expected, but in the future, there may still be a pattern of sideways movement and then step down.
As for whether the current price level is a bottom-fishing opportunity, we believe that it is not the real bottom of this callback. On the morning of August 17th, when I opened my phone, I not only discovered the market crash but also received more than 30 messages from friends, all asking the same question: Is the decline over? Can we buy at the bottom?
Based on market experience, the price level that everyone asks about whether to buy at the bottom is basically not the real bottom. As for where the real bottom is, we still maintain the judgment from the previous monthly report:
Sentiment condition: Binance OI falls to a low level (30 billion or below), rates become negative
Funding condition: Net outflow of stablecoins weakens
Chip condition: relative to the current market price, BTC falls to the level of 22,000-23,000, and ETH correspondingly around 1,400
Perhaps one more condition is needed, that is, one day when I wake up and receive 30 messages again on my phone, if all of them say: Is the industry finished? That will be the best buying point, and this buying point should appear within the next quarter.
