Has BTC hit bottom after falling below $28,000?

OKX Eurotrade Market shows that at 11:00 pm Beijing time on the 17th, BTC fell below the $28,000 mark, hitting a new low since June 20 this year. In the past 48 hours, the price of BTC has continued to decline from 29,330 USDT to 27,676 USTD, with a maximum drop of 5.6%. As of press time, BTC is temporarily reported at 27,900 USDT, a 24-hour drop of 3.8%.

Affected by the downward trend of BTC, the overall performance of the crypto market was poor, with a general decline of more than 3% in the past 24 hours; among them, ETH fell to a low of 1718 USDT, a 24-hour drop of 4.4%; among the top 50 tokens by market value, the top three in the decline list were SHIB (-11.7%), BSV (-7.4%) and BCH (-5.5%).

According to Tradingview data, the total market value of cryptocurrencies has dropped to $1,153.3 billion, down 3.3% in 24 hours. In terms of market value share, BTC still accounts for more than 50%, temporarily reporting 50.09%, down 1.94% from this year's high (52.03%); ETH accounts for 19.25%, back to the level around June 20. Today's Fear and Greed Index is 50 (yesterday was 50), and the level is still neutral.

In terms of derivatives trading, Coinglass data shows that in the past 4 hours, the entire network has a liquidation of US$102 million, of which Bitcoin has a liquidation of US$43 million and Ethereum has a liquidation of US$35 million; in the past 24 hours, the total liquidation amount of the entire network has reached US$224 million, the long position liquidation amount is about US$201 million, and the short position liquidation amount is about US$22.62 million. A total of 59,289 people have become victims of liquidation. The largest single liquidation occurred in OKX-ETH-USD-SWAP, worth US$6 million.

It is worth noting that the discount of Grayscale Fund's trust products has improved in the past two months. Currently, only 7 of the 14 products are discounted, one less discounted product (BAT) compared to June, and the premium rate of previously premium products has also soared in the past two months. Among them, the discount of BTC rose from 44.02% (June 15) to 23.9% (August 15), setting a high since April 2022. The discounts of Grayscale's other mainstream currency trusts are as follows: ETH (-37.46%), ETC (-56.01%), LTC (-39.2%), BCH (-24.6%), ZEC (-2.1%), and LPT (-36.7%); the seven products with positive premiums are FIL (455%), SOL (303.1%), LINK (127.7%), XLM (87.01%), MANA (48.9%), ZEN (26.09%), and BAT (8.3%).

Crypto-related listed companies were also affected by the rising market, and their stock prices generally fell today. Among them, the stock price of Coinbase (NASDAQ: COIN), a US compliant crypto platform, fell 2.9% to $76.80; the stock price of MicroStrategy (NASDAQ: MSTR), the largest Bitcoin holding listed company, rose 5.2% today to $353.9.

There are several possible reasons for the recent decline in crypto prices:

First, the spot trading market is shrinking, and existing users are fighting in the derivatives market, which affects the short-term market direction. According to The Block data, the 7-day average of spot trading volume on crypto exchanges has dropped to $11.2 billion, less than 30% of March ($46.26 billion). At the same time, the open interest in the derivatives market has increased significantly. For example, the open interest of Bitcoin contracts on Bybit has reached a 16-month high in the past two days, and CME Bitcoin futures hit the highest monthly trading volume this year in July.

Especially in recent times, Bitcoin volatility is at a historical low. Kaiko data shows that Bitcoin's 90-day volatility has dropped to 35%, and its 30-day volatility is close to a five-year low; Bitcoin's volatility is currently lower than the S&P 500, technology stocks, gold, etc. The longer volatility remains low, the more fragile the system will become, the more leverage is used, and the market will usher in major changes in the short term. Judging from today's results, the shorts seem to have won this time.

Dylan LeClair, an analyst at UTXO Management, said: "The current market is just a dead end of derivatives traders fighting each other. Most of the spot bearish traders have sold out, while the spot bullish traders may have fully deployed funds or are still waiting for the approval of the Bitcoin spot ETF."

Second, the market has insufficient funds, and new coins are sucking blood. As spot trading shrinks and Bitcoin volatility decreases, another direction of market competition revolves around new coins. In the past two days, Sei (SEI) and CyberConnect (CYBER) have been launched on major platforms, attracting attention. Taking SEI as an example, its 24-hour trading volume on Upbit in South Korea exceeded US$400 million, accounting for a quarter of the platform's total daily trading volume, which is nearly 4 times the trading volume of the BTC/KRW trading pair (US$120 million). The funds on the market are limited, and the blood sucking of new coins further reduces the liquidity of the market, and the market is going down.

Third, investors may shift assets from high-risk Bitcoin to U.S. Treasuries. The decline coincided with a surge in U.S. bond yields. On August 17, the yield on the 10-year U.S. Treasury bond climbed to 4.31%, the highest level since October 2022, indicating that investors are turning to safer assets rather than cryptocurrencies such as Bitcoin.

(Chart of US 10-year Treasury yield and BTC price trend)

Regarding the future market trend, crypto data analysis company Santiment tweeted that the crypto market may be about to rebound. Santiment data shows that the ratio of losing trades to profitable trades has recently reached a 5-month high, which is a bottoming signal in history. "Historically, a high ratio of losing trades to profitable trades increases the likelihood of a rebound compared to any profit-taking."

From a macro-cyclical perspective, Bitcoin is still bullish. Data-wise, the amount of BTC reserves in exchanges has decreased, and the number of long-term BTC holders has hit a record high recently; news-wise, several companies’ Bitcoin spot ETF applications are expected to be approved next year; macro-wise, the Fed’s interest rate hikes are entering the later stages, and are expected to stop next year, ushering in a new round of bull market.