Author | Qin Xiaofeng

Produced | Odaily (ID: o-daily)

Produced | Odaily (ID: o-daily)

As the central banks of various countries raised interest rates and curbed inflation, the global financial market has continued to decline in the past few months, and encrypted finance is also difficult to survive alone.

At 8 a.m. on May 10th, Beijing time, BTC finally fell below the psychological barrier of $30,000, hitting a new low in nearly 10 months, with a 24-hour drop of 11%. The highest drop of other cryptocurrencies generally exceeded 20%. According to data from Coin Coin, a total of $1.05 billion has been liquidated in the past 24 hours.

The NFT market was also affected. The floor prices of popular blue chips BAYC, Azuki and other NFTs fell by more than 20% in 24 hours, and the liquidity decreased, and the trading volume plummeted.

In addition, the stock prices of encrypted listed companies also fell in a waterfall, generally above 10%. Among them, the stock price of Coinabse fell by 32% in 48 hours, hitting a record low of US$70.19, and is currently maintained at around US$73, which is 70.8% lower than the IPO issue price (US$250). It was tentatively quoted at $225.52.

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1. Market review: Bitcoin fell below the 30,000 mark

Different from the two sharp falls of "312" and "519", this round of cyclical decline of Bitcoin is really "cutting flesh with a blunt knife", which lasted for nearly two months.

On March 28, Bitcoin hit a new high of $48,200 this year, and is about to break through the "bull-bear dividing line" - the 200-day moving average (MA200). At that time, under the tense situation between Russia and Ukraine, the global financial market generally performed poorly. The outside world was full of expectations for Bitcoin, and believed that it could go out of the independent market and even break through the $100,000 mark within the year.

However, prosperity must decline, and this expectation was quickly shattered by reality.

After hitting a new high for the year, Bitcoin consolidated around $45,000 for nearly a week until April 5, when it officially established a downward direction and started a negative decline that lasted for more than a month. Throughout April, the highest single-day decline of Bitcoin was only 6%, and the decline was only about 2% most of the time. The long and short forces competed around the $40,000 mark, but the rebound time was less, which seemed to indicate the defeat of the bulls today.

On May 5, Bitcoin began to accelerate its downward trend, falling below important support levels one after another, and on May 9, the short force reached its peak; in the past 24 hours, Bitcoin fell from $34,000 to below the $30,000 mark, and fell as low as 29,725 U.S. dollar, the largest drop of 12.5%; since May, the largest cumulative drop of Bitcoin is 25.6%; as of press time, BTC has rebounded to $31,000.

In addition to Bitcoin, other cryptocurrencies such as Ethereum have also been hit hard. Among them, ETH has the largest drop of 13% in 24 hours, falling below 2200 US dollars, and the largest cumulative drop of 43.4% in the year; the top ten cryptocurrencies in the market, such as BNB, SOL, XRP, ADA, etc., generally drop by more than 15%; Once dropped to $0.66), the price of LUNA has halved in the past 24 hours, with a maximum drop of 63%, and is currently at around $16.

Affected by this, the market value of the entire encryption market has also shrunk by US$130 billion in the past 48 hours, temporarily reported at US$1.5 trillion, a drop of 8%. Since the beginning of the year, the total market value of encryption has shrunk by US$830 billion, a drop of 36%.

According to Coin data, in the past 24 hours, a total of US$1.05 billion has been liquidated across the network, and a total of 289,400 people have become liquidated victims, with the largest single liquidation of US$23.26 million; in the past 30 days, a total of US$7 billion has been liquidated. Comparing the "519" liquidation data (6.91 billion US dollars, about 580,000 people liquidated), it can also be seen that the development of the derivatives market is maturing.

In fact, as early as a month before this sharp drop, derivatives users had already taken the initiative to reduce leverage. According to the encryption market analysis data released by The Block in April, BTC/ETH futures open interest and option open interest have both declined, and the trading volume of Bitcoin futures contracts and Ethereum futures contracts is also falling. Transaction volume fell to $1.03 trillion, a drop of 20.2%.

In terms of on-chain transactions, according to the data of Oukeyun Chain Master, the 24-hour liquidation volume of DeFi mortgage loans on the entire network reached 70 million U.S. dollars, a record high in the past 90 days; Points fell by more than 35%.

In addition, users' enthusiasm for trading has greatly decreased. Today's panic and greed index is 10 (11 yesterday). The degree of panic has increased compared with yesterday, and the level is still extremely panic.

Affected by the slump in the market, the NFT market has also begun to suffer. In yesterday's decline, the number of BAYC pending orders surged, but the transaction volume was low. In order to cash out as soon as possible, some users chose to sell NFT at a low price, resulting in a continuous decline in the floor price. NFTGo.io data shows that the floor prices of blue-chip NFT series such as BAYC and Azuki have fallen by more than 20% in the past 24 hours. Among them, the floor price of BAYC series NFT once fell to 89.9 ETH, and the trading volume fell by 50% in the past week; the floor price of MAYC series NFT dropped to 17.98 ETH, and the floor price of Azuki series NFT fell to 10.5 ETH.

Encryption-related listed companies were also affected by the falling market, and their stock prices generally fell by more than 10%. Canaan Technology (NASDAQ: CAN), the first mining machine stock, temporarily reported at $3.18, with a maximum drop of 25.3% in 48 hours; the stock price of the encryption platform Coinabse fell 32% in 48 hours, hitting a record low of $70.19, and is currently maintained at around $73. The IPO issue price ($250) fell by 70.8%; the stock of MicroStrategy, the listed company with the largest Bitcoin holdings, fell by 25.55% in 48 hours, temporarily reported at $225.52; Tesla's stock price fell by 9%, and Robinhood's stock price fell by 11.3% in 48 hours.

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2. Under the background of inflation rate hike, Crypto and U.S. stocks fell at the same frequency

Every time the encryption market goes down, the market has to explore the cause. But this time, the algorithmic stablecoin UST was "born at the right time" and became a "back-up man".

In the past two days, a picture has been widely circulated in the encryption community, teasing that the UST unanchor belt collapsed the entire encryption market: At first, they used air LUNA pledges to generate UST. BTC brought down the entire market, but no one stood up to speak for me.

According to the data monitoring of SkyEye on the Okey Cloud chain, the address of Luna Foundation Guard (LFG), which is marked as a Terra ecological non-profit organization, transferred 28,205.5 bitcoins again on the morning of the 10th. The rumors of smashing the market were confirmed. But then LFG said it would issue $1.5 billion in loans to help stabilize UST prices, and there were rumors that companies such as Jump and Alameda offered $2 billion to rescue UST. recommended reading"Starting the Death Spiral or Ending the Stress Test? Can UST be saved?》

In my opinion, the unanchor of UST this time is just a black swan event in the downward trend of the encryption market, and it is far from constituting the conditions for driving the entire market to plummet. As mentioned earlier, this round of decline in Bitcoin began in late March, largely due to changes in external macroeconomic policies: as central banks, especially the Federal Reserve, raised interest rates, global financial assets entered a stage of panic selling, Encrypted finance is difficult to be alone.

In order to restrain the rising inflationary pressure, the central banks of various countries have tightened monetary policies one after another, and raising interest rates has become the most important event in the global financial market in the past few months, among which the interest rate hike by the Federal Reserve has attracted the most attention.

Since the interest rate meeting in January this year, the Fed’s interest rate hike expectations have continued to disturb the US stock market; in February, the US Department of Labor announced that the US Consumer Price Index (CPI) hit a 40-year high, again increasing outside expectations for interest rate hikes; however, It wasn't until mid-March that the boots finally landed.

On March 17, the Fed announced an interest rate hike of 25 basis points (0.25%), raising the target range of the federal funds rate to 0.25%-0.5%. This is the first time the Fed has raised interest rates since 2018. Not only that, but the Fed also revealed more aggressive measures, which are expected to increase interest rates at six policy meetings this year to intensify efforts to slow inflation, which is at its highest level in 40 years. In addition, it will announce a reduction of $9 trillion in assets and liabilities in May table process.

Fearing that the Federal Reserve's measures to control inflation may lead to an economic recession and a liquidity crisis, U.S. stock investors have begun to sell their financial assets in order to avoid risks. It fell to the current 32,120 points, with a maximum drop of 12.7%; the Nasdaq fell from 15,832 points at the beginning of the year to the current 11,688 points, with a maximum drop of 26.1%; Off, the largest drop of 20.1%.

In particular, on May 5, the Federal Reserve announced the interest rate decision again, raising the benchmark interest rate by 50 basis points to the range of 0.75%-1.00%, which was the largest rate hike since May 2000. At the same time, it announced the plan to shrink its balance sheet starting in June. This interest rate hike triggered a new round of panic selling. US stocks hit a 52-week low, and the encryption market was also affected.

Over the past two years, Bitcoin's correlation with U.S. stocks, especially the S&P 500, has further strengthened. The fundamental reason is that with the implementation of the quantitative easing policy under the epidemic, more traditional funds began to pay attention to and invest in Bitcoin, viewing it as an emerging asset class in order to obtain asset appreciation, which also contributed to the bull market in the encryption market in the past two years. However, as the global interest rate hikes tightened the currency, traditional funds began to sell highly volatile assets. Crypto and U.S. stocks, which have good liquidity, became "abandoned" at this time.

In fact, the selling of Crypto has also been verified in the data analysis on the chain. According to data from Okey Cloud Chain, since the beginning of May, multiple encryption platforms including Coinbase have continued to inflow large amounts of Bitcoin. Currently, the inflow of funds from Bitcoin exchanges has hit a five-month high; according to the on-chain analysis platform Santiment, According to data, a large number of Ethereum tokens are flowing into exchanges. In the past two weeks, 330,000 ETH (worth nearly 825 million US dollars) has been transferred to cryptocurrency exchange wallets. The increase in inflow may indicate that the decrease in demand has led to increased selling pressure.

In addition to the unstable macro-environment of the global financial market, encrypted finance itself has also entered a development bottleneck, and the stock funds have been drained, and there are few incremental entries.

In 2021, the NFT market will develop vigorously, and the transaction volume will hit new highs repeatedly. According to the L'Atelier report, NFT sales will reach US$17.6 billion in 2021, an increase of about 210 times from the previous month, and the number of NFT buyers will increase from 75,000 to 2.3 million. At the same time, NFT transactions have also created good profits for investors, with investors earning $5.4 billion through NFT.

The continued enthusiasm for NFT trading has also continued into the second quarter of this year. The floor prices of many blue-chip projects have continued to hit new highs, and new projects have emerged one after another, continuously drawing stock funds from the market. According to data from blockchain analytics firm Nansen, professional investor (smart money) addresses have invested 4,864 ETH in NFTs since early April, earning 17,581 ETH in return, netting 12,717 ETH in NFT transactions.

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3. When will we get out of the crypto bear market?

The price of Bitcoin has hit a new low in nearly 10 months, and it has a tendency to fall below the low of "519". Regarding the future trend of encrypted finance, there are currently large differences of opinion in the market.

Pessimists believe that the crypto market has entered a bear market and the market may fall further.

According to a recent study by the blockchain analysis company Glassnode, according to the analysis of the Meyer Multiple (Meyer Multiple) indicator, it is still in a crypto bear market. This indicator suggests that we may have passed the initial phase of the late bear market and entered the second half of the bear market. However, based on previous cycles, it also suggests that it may be a while before the market has provided enough demand and price appreciation to allow for sustainable profitability and capital inflows. (Note: The Meyer Multiplier is one of the best-known Bitcoin indicators, a simple ratio between price and the 200-day moving average, which provides a strong and reliable indicator of long-term bottom and top formation for the Bitcoin cycle .)

Edul Patel, CEO of algorithm-based cryptocurrency investment platform Mudrex, said rising interest rates have given individual and institutional investors pause in thinking about the future of the crypto market. "This downtrend may continue in the next few days. Bitcoin may continue to test the $30,000 level," he said.

Vijay Ayyar, vice president of development and international affairs at Luno Pte, a cryptocurrency trading platform, said that the overall market is still under pressure from inflation and growth concerns. "significant" rebound.

There is no doubt that $30,000 is the psychological threshold of many institutional investors and crypto investors, and it is also the cost line for many listed companies to hold Bitcoin positions. Last year, Odaily counted the positions of eight listed companies (click to read), the average Bitcoin holding cost is $26,029, not far from last year’s market low of $28,800; and the price of Bitcoin rebounded quickly after falling below MicroStrategy’s cost price ($30,700) on May 10, which seems to indicate The support at this point is strong.

In addition, considering that encrypted finance is affected by US stocks, the two may rebound at the same frequency in the future. Mike Novogratz, CEO of Galaxy Digital, predicted in the recent earnings conference call that the encryption market will continue to fall, and he believes that the encryption recovery will not happen in the next two months. He added that cryptocurrencies will remain highly correlated with the Nasdaq 100, expressing "very confident" that once the stock market finds "some kind of bottom," Bitcoin will bounce back.

So, when will the U.S. stock market rebound? According to the latest Bank of America report, the US stock market has experienced 19 bear markets in the past 140 years, with an average decline of 37.3% and an average duration of 289 days. Although past performance does not fully represent future performance, if historical performance is used as a reference, the Bank of America team calculated that this round of bear market will end on October 19 this year, when the S&P 500 index will reach 3000 points , the Nasdaq Composite Index will reach 10,000 points. The "good news" brought by Bank of America is that many stocks in the US stock market have fallen into the bear market zone. In other words, Bitcoin and the entire encrypted finance may not have a major positive reversal in the next few months.

However, optimists believe that the price of Bitcoin is severely undervalued and the bear market is coming to an end.

Amber, an encryption asset management agency, pointed out in the latest analysis report: "From the data analysis on the chain, the continuous price decline has caused some long-term holders to stop losses and redistribute Bitcoin to new buyers. Although we Seeing that realized losses dominate the market, but the price is currently below 80% of the 200-day moving average, and has been at or below the 200-day moving average less than 15% of the time in the history of Bitcoin being traded price, which is a notable indicator that Bitcoin is currently undervalued.”

Cathie Wood, founder of ARK Invest, believes that the increasing correlation between cryptocurrencies and traditional assets indicates that the bear market will soon end. “Cryptocurrency as a new asset class shouldn’t look like the Nasdaq, but it does. It’s highly correlated right now. You know you’re in a bear market, maybe when everything starts to look alike, close The end is coming, and we're seeing market after market capitulate."

Despite the current market downturn, she remains a long-term believer in cryptocurrencies because, like ARK's other investment classes, she believes cryptocurrencies will grow exponentially with peak markets and societies. According to Wood, blockchain is one of the industries that offers exponential growth opportunities, and she believes that these industries (artificial intelligence and blockchain technology, etc.) will increase their total valuation by 21 times in the next 7 to 8 years.

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4. BTC will live forever, Web3 will never die

In the past ten years, Bitcoin has experienced more than one plunge, and market panic is also expected, but in the end Bitcoin still survived tenaciously, so investors do not need to be overly pessimistic. What we should think more about is how to truly make Web3 bigger and attract more incremental (users, funds) admission.

From the perspective of Bitcoin, although the holders include retail traders, high-net-worth traders, some hedge funds and professional funds, the basic market is still not large enough. Compared with the entire traditional financial market, the proportion of listed companies that have allocated Bitcoin as an asset reserve is very small, and the asset volume is even less than 1%. In addition, there are no sovereign wealth funds holding BTC. This means that when cryptocurrencies fall, there are not enough buyers to prop up the market. Only when the basic market of Bitcoin is large enough can it truly resist risks.

From the perspective of global market distribution, the development of Web3 in Europe, the United States, and Asia is becoming more and more mature, while there are still high development potentials in other underdeveloped regions that can be tapped.

Taking Africa as an example, due to the extreme lack of banking services, cryptocurrencies have become an important alternative for cross-border payments. The data shows that in 2020, the African continent has developed into the second largest region for encrypted P2P transactions, and Nigeria, Kenya, and South Africa have become active regions for encrypted transactions in Africa; in 2021, Africa will continue to occupy a central position, and the adoption rate of cryptocurrencies has surged by 1200% , Kenya leads the world in P2P transaction volume for the second year in a row. According to the report of the US Insights company, the adoption rate of cryptocurrencies among the bottom crowd in Africa is also the highest in the world.

Although the spot market has fallen, judging from the recent financing, Web3 is still an important track for institutions to hold heavy positions. According to statistics from The Block, there were 244 investment and financing transactions in the encryption industry in April, a record high. Additionally, several new venture capital funds launched, including new funds from Dragonfly Capital, Union Square Ventures, and Framework Ventures.

All in all, at the moment when the global financial market is generally sluggish, Web3 is still the most dynamic industry, and it is also the most important outlet in the next ten years. As the slogan of the old venture capital Sequoia Capital said, there will continue to be people "All in Crypto".