Crypto Market November Briefing: The Fifth Bull Market Is Just Around the Corner

Macro Market

As EMC Labs predicted in its October briefing, after achieving an annual breakthrough in October, BTC continued to fluctuate upward along the rising channel in November, pushing the price to around $38,000.

After achieving consecutive increases of 28.54% and 8.88% in October and November, the profit level of BTC holders reached the highest level of the year. The selling to lock in profits and the worry of high-level consolidation caused BTC to continue to fluctuate around the middle track of the rising channel (about US$37,000), and the volume shrank.

 BTC monthly trend

Although there is still one month left in the year, all parties in the market have tacitly accepted that this round of interest rate hike cycle has ended. Labor employment data has begun to decline, and a mild recession in the US economy has begun. Major investment banks have begun to predict the start time of the interest rate cut cycle - summer or second half of 2024.

Against this backdrop, the US dollar index recorded a 3% drop for the month, indicating that expectations for easing are growing stronger and funds are beginning to flow into equity assets with higher risk appetite.

The macro financial market began to rise. After falling for three consecutive months, the Nasdaq rebounded sharply near the October moving average, achieving a monthly increase of 10.7%.

 Nasdaq monthly trend

This month, Binance, the world's largest centralized exchange that has played a huge role in promoting industrial development and thus posed a challenge to the old system, reached a settlement with the U.S. Department of Justice, bidding farewell to its wild past at the cost of a huge fine of $4.3 billion and the founder's resignation as CEO. The overall market attitude is optimistic about this. Although not all "black swan"-level uncertainties have been eliminated, we tend to believe that the crypto industry is bidding farewell to the wild development period, and in the next few years, compliance development that connects the traditional world will become the mainstream.

This is the pain of adulthood, but also a medal to cover the wound. Only in this way can encryption technology penetrate into the western part of human society, and the encryption market can reach a scale of 10 trillion US dollars in the next few years and become one of the largest equity markets in the world.

Crypto Market

In November, BTC opened at $34,656 and closed at $37,732, with a monthly increase of 8.88% and an amplitude of 12.7%.

The biggest market achievement of BTC this month is that it has completely bid farewell to the constraints of the oscillation box (purple area in the figure below) that has troubled its trend for half a year. The price has been running above $34,000, the high point after the breakthrough in October, for the whole month. Although the volume has shrunk, it is still moving upward amid hesitation and ambiguity.

The middle track of the rising channel (the green box in the figure below) has also become the focus of competition between long and short parties. On November 15/16, and 20/21, the long and short parties had a hard conflict near the middle track. The trading volume on the conflict days showed an amplified trend, showing that the determination of selling loose chips and new funds to grab chips after a sharp rise was quite strong.

 BTC daily trend

In the end, the bulls had the upper hand, and despite the suppression of multiple technical indicators, the BTC price remained strong and hit a new rebound high.

The more positive side is that the L1 sector has surpassed BTC in monthly growth. ETH has risen 13.08% this month, outperforming BTC by 5,500 basis points. SOL, AVAX, OSMO and other L1 Altcoins have seen their highest growth of 3 times since their launch in October, vaguely showing a trend of funds flowing from BTC to sub-sectors.

ETH's continued growth surpassing BTC is one of the signs of the start of the bull market and deserves close attention.

Funding

Through technical analysis, we can know the trend changes in the static market. However, the main driving force of the market since October is the accelerated entry of off-market funds. To make judgments on the future market, we must analyze this main factor in depth.

Following the positive inflow in October, stablecoins continued to have net inflows in November, and the scale of inflows increased to US$3.5 billion, 3.5 times the scale in October. EMC Labs pointed out in its October briefing " EMC Labs October Briefing: Breakthrough as expected! BTC is likely to fluctuate upward along the channel in the future ": "The outflow trend reversed in October, and stablecoins achieved a single-month net inflow. Stablecoins are beginning to get out of the bear market."

In November, this judgment continued to be realized. BTC came out of the bear market at the beginning of the year, and stablecoins came out of the bear market in October. The overall bull market of crypto assets is getting closer and closer!

This month, stablecoins have accelerated their inflows. EMC Labs believes that if stablecoins continue to inflow in December, they will enter a bull market. In conjunction with BTC, which has long been out of the bear market, in the most optimistic estimate, the market will enter the early stages of the fifth crypto asset bull market as early as January.

Although the overall supply of stablecoins will not turn positive until October this year, as early as December 2022, the supply of USDT has turned from outflow to inflow, and hit a record high in October. This advance inflow of funds, together with the funds on the market, copied the fourth bottom in Bitcoin's history and contributed to the 130% strong rebound achieved by Bitcoin in the first 11 months.

Compared with the overall net inflow in October, the biggest achievement of the stablecoin market this month is that USDC has also ended its outflow and started to achieve net inflow. This means that traders using these two types of stablecoins have begun to be optimistic about the market outlook and have begun to increase their positions.

Supply Trends

With the continuous rise in October and November, the overall supply of Bitcoin is becoming more and more optimistic. This is an internal factor that we must continue to pay attention to in addition to the net inflow of funds.

As of the end of the month, 87% of the total Bitcoin supply was in a profitable state, thanks in part to the rise in BTC prices and in part to the massive capitulation and bottom-fishing that occurred during the bottoming and repair periods.

 BTC overall supply profit and loss distribution

Correspondingly, BTC’s cost structure has also changed dramatically:

 BTC overall supply cost distribution

$33,634 has become the largest chip accumulation area, most of which were built in October. This is one of the reasons why we judged in the October briefing that the market would not pull back in November but continue to rise.

Above that is $48,000, which is the accumulation area formed in the last bear market decline and the high point of our judgment of the repair period. This high point may be reached in December or January. It is almost meaningless to judge the price, but if it is achieved, there will be a double-digit rise in December.

Long-Short Game

Looking at the long and short positions and the exchange positions, throughout November——

 BTC holdings of various market parties

Long hands: +110,000, to 14.96 million;

Short-handed: -70,000 to 2.29 million;

Exchanges: -40,000 to 2.32 million

Long hands are still collecting chips, while short hands are still handing over chips. This performance is in line with the convergence trend of "continuous loss of liquidity" during the repair period. The continuation of this trend makes it difficult for the market to fall sharply in the short term.

Looking at the floating profits of long and short positions, the floating profits of long positions reached 81% and the floating profits of short positions reached 21%. Compared with October, the floating profits of long positions continued to rise, while the floating profits of short positions slightly decreased by 1%, also maintaining a high level of short positions.

 Floating profit status of long and short positions

During the repair period, profit levels will gradually recover. At the same time, as the repair period progresses and optimism about future trends gradually increases, the floating profit thresholds of all market parties will gradually increase.

Continue to check the profit lock-in situation: the profit level of selling long positions is between 30% and 70%, and the profit level of selling short positions is between 0% and 3%.

Judging from the profit level of long hands, the weak hands among the long hands are selling (their profit level is lower than the overall profit level of long hands).

Judging from the profit level of short-term traders, the strong ones among the short-term traders choose to hold their coins and wait for the price to rise (the profit level of sellers is far lower than the overall profit level of short-term traders).

The market is currently at the end of the repair period. During this period, the profit expectations of long-term investors are getting higher and higher (after entering the rising period, i.e., the bull market, their expectations will reach several times more), while the profit expectations of short-term investors are also gradually increasing. At the same time, the weak hands among short-term investors and the weak hands among long-term investors become the final "clearance" targets. The chips collected by long-term investors this month come from this part of market participants.

Re-examining the scale of long and short selling in November——

Long holders sold off on a large scale on November 2, 10, 21 and 28, selling 21,653 coins in four trading days.

Short-term selling occurred on a large scale on November 7, 21, 22 and 24, with 161,839 coins sold in four trading days.

This is the weak hand selling situation in the long and short groups. Compared with other months of this year, the overall selling level is in a downward state, which also shows that all parties in the market are optimistic about the future market as a whole.

 Statistics on the scale of long and short selling

In summary, for the most important long-short game in the market, EMC Labs maintains its previous judgment: the market is still in the repair period, the chips continue to "go from short to long", and liquidity is further lost. Although the floating profits of long and short hands have set a record high in this round of repair period, the scale of selling has not increased. The market has entered the end of the repair period, and the rising period or "bull market" is looming ahead.

On-chain data

On-chain data is a stabilizer of BTC prices. Price increases supported by on-chain data are more sustainable, and upward or downward prices that deviate from on-chain data are bound to be unsustainable.

In October, we observed a sharp decline in the number of new addresses, daily active entities, transaction size, and miner income. This divergence was effectively corrected in November.

 New addresses added to BitNetwork

 BitNetwork Active Entities

 Gas revenue of Bitcoin network miners

Since April this year, with the rise of Ordinals assets, especially BRC-20 MEME tokens, more than 30,000 BTC have entered miners' wallets as new "consumption type" Gas. Whether these tokens will become a new type of asset is still controversial, but the surge in transactions caused by the two waves of enthusiasm in April and November did "pollute" the data. Therefore, we should look at the on-chain data repair in November objectively.

As the BRC-20 MEME craze cools down rapidly, we need to further observe the "bullish" trend based on the on-chain behavior of accumulation and selling in December.

About the Bull Market

According to the Emergence Engine developed by EMC Labs, the repair period index has been at 100 for nearly a month. Historically, if this time reaches two months, the market will enter a bull market.

The EMC Labs Repair Period Index combines multi-dimensional on-chain data and reflects the internal factors of the market. The external factors, namely the capital inflow, are also very optimistic. In October, net inflows were achieved for the first time this year, and the scale of inflows in November reached 3.5 times that of October. If the inflows continue to accelerate in December, the inflow time will reach 3 months. Three months is sufficient to judge the medium- and long-term trends.

The last month of 2023 is very important. It is a dual focus for examining the internal and external factors of the crypto asset market. The light that shines from this focus will illuminate the next bull market.

This is the conclusion reached by EMC Labs based on objective data from the specific heat network.

The trouble still exists——

For example, the United States has just begun a mild recession, and the equity market may adjust downward next, which may even affect the inflow of stablecoins?

January 2024 is the deadline for response to the US BTC ETF application. If the application is rejected, the crypto market may enter a period of adjustment.

After Binance, will other exchanges or even public chains and stablecoin issuers be sued and held accountable by the U.S. Department of Justice and the SEC?

After FTX went bankrupt, the asset disposal party is selling billions of tokens to the market. Will the large-scale sell-off by a single entity disrupt the market rhythm?

In the face of internal and external factors, we should make the most active position preparation; in the face of uncertainty, we should control risks strategically. If so, this "uncertainty" is no longer important.

We are eagerly looking forward to the arrival of December and are ready to share with you our judgment on the conditions and main track of the bull market in the next monthly briefing.

Conclusion

November is an important month.

We have reaped the recovery of on-chain data, and are happy to see the continued upward movement of BTC prices. We have seen a small-scale exit of weak hands, and a continuous increase in the floating profit threshold of long and short hands.

The crypto asset market was settled with a sky-high fine, USDC ended its divergence, and stablecoin supply saw massive inflows throughout the month.

December is a more important month.

Amid ambiguity and anxiety, the "internal feelings" and "external responses" of the crypto asset market will approach the near point.

The long repair period is about to end, and the upward period (bull market) is about to emerge!