The reappearance of the magical cycle may cause BTC to fall to $30,000. Who will trigger the short-term black swan?

After the Bitcoin ETF is approved, how will the BTC market develop in the short term? This has become a hot topic of concern in the market. From a cyclical perspective, Bitcoin is likely to experience a large retracement. From a capital perspective, where does the selling pressure mainly come from? What are the main factors that really affect the short-term market of Bitcoin? What are the underlying reasons for a large retracement? This article will discuss these issues.

If BTC falls back in a cycle, around $30,274 will be the main support

Bitcoin is halved every four years, and the Bitcoin market also produces a bull-bear cycle every four years. In this industry, the four-year halving cycle has been repeated many times, and many investors trust it and decide their investment behavior based on it, thus affecting the price trend of Bitcoin. In addition, Bitcoin ETF is the first time in the history of Bitcoin, and many people also compare it with gold to predict the future trend of Bitcoin. Overall, for the Bitcoin market, these two views suggest that Bitcoin is expected to hit a new high after the retracement. The question now is, how deep will the BTC retracement be?

From the perspective of the halving cycle, BTC has experienced three initial stages of bear-to-bull transitions in history, all of which saw a sharp rebound from the bottom. From the Fibonacci retracement line in the K-line indicator, we can observe its periodicity and find that after BTC fell from the top of the first bull market of $1,175 to the lowest point of $162 in December 2013, it rebounded to $789 in June 2016, which is exactly the golden ratio of the Fibonacci retracement line of 0.618; then it began to pull back, and the pullback depth ended at 0.382, and the main bull market trend began. In December 2017, BTC fell from the top of the second bull market of $19,891 to the lowest point of $3,215, and then rebounded to $13,971 in June 2019. The rebound height was based on the Fibonacci 0.618 position; then it began to pull back, and the first pullback depth was about 0.539 from the rebound high (near $6,434); then due to the panic caused by the COVID-19 epidemic, the second pullback ended at about 0.738 (near $3,791), and the main bull market trend began. With the passage of the Bitcoin ETF, Bitcoin reached $48,988, reaching the rebound high of 0.618. If the historical cycle is staged, then the Bitcoin pullback depth is likely to be 0.382, and the corresponding low price is $30,274.

From the perspective of the gold ETF cycle, in March 2003, Australia opened the world's first gold ETF. In October 2004, the SEC approved the first US gold ETF GLD. In November 2004, the US gold ETF GLD officially took effect and began trading. At that time, the Federal Reserve implemented a relatively loose monetary policy. Gold rose sharply after the first gold ETF was approved, and it continued until the US ETF began trading. The US gold ETF GLD continued to sprint slightly after the SEC approved it. After the US gold ETF began trading, it fell by about 9% in two months, falling below the price when the ETF was approved. In the following years, more funds entered this market. The financial crisis in 2008 pushed gold to $1,000. After the Bitcoin ETF was approved, it reached a high of $48,988. As of January 16, the lowest price of BTC was $41,360, with a maximum decline of 15.6%. Judging from the decline, it seems that Bitcoin has fallen a lot, but the decline time is relatively short.

From a cyclical perspective, Bitcoin has actually followed the general path of the gold ETF, with a continuous rise on the eve of the passage and a short-term correction after the passage. At present, the adjustment range of Bitcoin is larger than that of gold, but the time is still shorter. If we follow the cycle of the previous bull top, it is far from being in place now; but with the great changes in the external macro environment of Bitcoin, if we do not consider the black swan event, the correction range of Bitcoin will not be too large. This article tends to believe that Bitcoin will have a period of consolidation similar to that of gold in the past, that is, exchanging time for space, and this stage is mainly for the main force to wash and absorb funds.

Grayscale GBTC became the main selling pressure, but the buying pressure held up

The selling pressure of Bitcoin mainly comes from profit taking. On the one hand, it is the market's expectation of a callback. From the trend of Bitcoin, Bitcoin has not seen a large callback since it rebounded from the bottom, and the market has a "fear of heights" sentiment; and the theoretical basis supporting this sentiment is the view of the cyclical theory school introduced above. In addition, a major selling pressure is Grayscale's GBTC.

Before GBTC was converted into a Bitcoin ETF, GBTC had a negative premium for a long time. In December 2022, the negative premium of GBTC once reached 50%. However, with Grayscale's victory over the SEC in 2023, the negative premium of Grayscale GBTC continued to narrow. After the US SEC passed the Bitcoin ETF, GBTC profit-taking formed a short-term selling pressure on the market.

According to Yahoo Finance data, the spot Bitcoin ETF had a trading volume of $4.6 billion on the first day of trading, and a total trading volume of $3.1 billion on the second day. According to BitMEX Research statistics, on the second day of the spot Bitcoin ETF's listing, GBTC outflowed $484 million, and the total outflow of GBTC in the first two days was $579 million. Overall, GBTC's funds are showing an outflow trend.

Although GBTC has become the main outflow, the buying has actually withstood the pressure, and it can still be seen as the main wash phase. Data monitored by EMC Labs, a crypto asset fund management company, showed that GBTC had a net outflow of 579 million US dollars in the first two trading days, and other ETFs had a net inflow of 819 million US dollars; the overall net inflow was 240 million US dollars; from October to the 12th, BTC set a 12-month single-day CEX deposit volume for three consecutive days, with a cumulative total of more than 300,000 bitcoins; however, the withdrawal volume has increased synchronously in the past few days, and the final net deposit is only 16,000; from the 13th to the 14th, BTC deposits fell rapidly to 58,000, while the withdrawal volume increased synchronously, and CEX had a net outflow of 20,000 bitcoins; so from October to the 14th, it was a net outflow, which can be regarded as buyers withstanding the selling pressure; CEX accumulated 3.3-3.6 billion US dollars of buying power from October to the 14th, and this buyer power has not been reduced. This indicator is a comparison of Bitcoin/ETH net deposits/inflows and the net value of stablecoins on CEX; stablecoin minting added $1.7 billion in the past week, plus $2.1 billion in the first week of January, adding $3.8 billion. The speed of external funds entering the market remains at a high level in the past three months. In summary, Bitcoin is currently in a wash-out state, and sellers and buyers are undergoing a new adjustment, which seems to be the beginning of the journey after the adjustment.

BTC's short-term trend may mainly depend on changes in the macro environment

How will Bitcoin develop in the future? There are many opinions from big Vs in the market, some are bullish and some are bearish. This article simply selects a few for readers' reference.

Cathie Wood said that after the ETF is approved, it may not be as predicted by some people that "good news will be exhausted and then fall. Based on our five years of investment experience, we believe that the funds flowing into this new asset class, especially institutional funds, will be considerable. Institutional allocations to Bitcoin do not need to be too much to push up the price of this asset, which is becoming a scarce asset, by a lot.

Mindao: I don’t think there will be a large influx of funds in the short term. The market share of Bitcoin ETF has reached about 2%. The market needs some time to slowly lay out and digest the existing funds. Matt Hougan , Chief Investment Officer of Bitwise , said that the market overestimates the short-term impact of Bitcoin spot ETF, but also underestimates the long-term impact of ETF. Kiwi said that in the short term, funds have been fully pressed in, there will be a negative decline and no large funds will enter.

Arthur Hayes : The cryptocurrency bull market is in its early stages, and we must control our enthusiasm. We must remain vigilant and invest accordingly. In short, I am preparing for a sharp drop in all cryptocurrencies in March this year, and various events have led me to foresee that this will happen. I believe that the reverse repo balance will reach $200 billion in early March. This estimate is based on the rate of decline from different starting points in 2023. If the reverse repo is close to zero in early March, financial markets will begin to fall. I expect that no matter what price Bitcoin reaches in early March, it will experience a 20% to 30% adjustment. With the start of trading of spot Bitcoin ETFs listed in the United States, the wash-out may be more severe.

In summary, no matter which big V is optimistic about Bitcoin in the long run, this is not what this article wants to focus on. In the short term, the main factor affecting the price of Bitcoin depends on the amount of funds flowing into the Bitcoin ETF, and it seems more likely to be a wash-out with a negative decline. In addition, the postponement of the Fed's interest rate cut expectations may cause a large correction in the US stock market and the cryptocurrency market, which is also a possible black swan event that this article believes may occur. From the perspective of asset attributes, Bitcoin is essentially a risky asset. After entering the US stock market, it may be adjusted more significantly due to changes in macro factors.

Summarize

From the perspective of the cycle, if Bitcoin follows the callback, the callback low point is around $30,000. From the perspective of the moving average, MA200 is an important bull-bear support line. Its current position is around $33,000. This position will become the actual main support. Even if it falls below it for a short time, it will be quickly recovered. In the short term, this article tends to believe that BTC will undergo a period of negative decline. During this period, macro factors have become the biggest uncertainty, which may cause Bitcoin to reproduce a magical cycle.