The crypto market is experiencing "Black Friday". Are the bears coming or are you panicking?

Author: Chen Xiaohei

Produced by: Ostrich Blockchain

On November 26, the crypto market experienced "Black Friday", with Bitcoin falling to a 7-week low and altcoins also generally falling, awakening some investors' memories of the bear market. So, this "Black Friday" incident, is it the bear market coming or are you panicking?

Why does "Black Friday" occur?

Let’s start with the reasons for “Black Friday”. There are three main reasons why the crypto market encountered “Black Friday”.

The first is that a new coronavirus variant was recently detected in South Africa and quickly spread to Asia and Europe. It is said that this virus variant may have evolved from AIDS patients. This speculation has caused market concerns about the accelerated spread and spread of the epidemic, as well as pessimistic expectations of global investment institutions on the outlook for the world economy. It was market concerns and pessimistic predictions that directly caused the general decline of crypto assets on Friday.

The second is that the increase in the US inflation rate hit a 31-year high, triggering expectations that the Fed will raise interest rates earlier. Data showed that the US CPI rose for the 17th consecutive month in October, up 6.2% year-on-year, exceeding expectations, and the highest increase since December 1990; the month-on-month increase was 0.9%. The year-on-year and month-on-month increases in the US core CPI in October also exceeded expectations. The market believes that the high inflation pressure has brought pressure on the Fed to accelerate the reduction of bond purchases or raise interest rates earlier, as well as expectations of tightening funds, which also added fuel to the "Black Friday" incident.

The third is that the first U.S. debt default deadline in history is approaching, causing investors to worry about the risk of U.S. debt default. In fact, as the U.S. economy deteriorates due to the increasingly out-of-control epidemic, investors generally believe that the bonds due on December 21 are completely in the danger zone of "default risk". Last month, the U.S. government temporarily increased the debt ceiling by $480 billion, which gave investors a "reassurance pill". But on Tuesday, U.S. Treasury Secretary Yellen once again urged Congress to raise or suspend the debt ceiling, and warned that if no further measures were taken, the government might shut down after December 15, which once again made investors worried.

Will Black Friday bring about a bear market?

It is these three reasons that scare the crypto market. So, will "Black Friday" "invite bears into the market"? The author believes that "Black Friday" does not support "invite bears into the market".

From the trend of Bitcoin , the daily line of Bitcoin has been in a downward channel since November 12, indicating that the decisive factor for Bitcoin's decline on Friday was not the above reasons, but the established trend. The role played by the main force in this decline is nothing more than taking advantage of the above reasons. However, it is worth noting that the decline of Bitcoin on Friday was not accompanied by the main force's shipment behavior, indicating that the market has no basis for a bear market.

From the perspective of the external market, although the epidemic situation has reappeared in various stocks, aviation, tourism, and hotel stocks have plummeted, and crude oil prices have recorded the largest single-day drop in July, safe-haven currencies such as the Japanese yen are rising, indicating that there are considerable risk factors in the market. After all, this wave of decline in crude oil is inseparable from the market's concerns that travel will be restricted again, and the market's risk aversion demand is also considerable, which explains the rise in safe-haven currencies such as the Japanese yen.

From a macro perspective, on the one hand, despite a sharp drop in global financial markets, the funding situation is not tight but very loose. After all, the United States has injected a total of 33 trillion in liquidity into the market for 78 consecutive weeks; on the other hand, if Powell, who is dovish and has a high tolerance for inflation, is re-elected as Chairman of the Federal Reserve, and Brainard, who is more dovish than Powell and also has a high tolerance for inflation, serves as Vice Chairman of the Federal Reserve, the United States will maintain an easy monetary policy and provide financial support for the recovery and strengthening of the crypto market.

According to on-chain data, long-term holders are starting to sell, indicating that Bitcoin may soar, because long-term holders usually sell when Bitcoin rises and buy when it falls. In fact, the last time the long-term holder net position change indicator transitioned from green columns (net buy) to red columns (net sell) was in mid-October 2020 (blue circle on the left). At that time, Bitcoin broke through the resistance of $12,500, growing 417% in just 6 months, opening the first stage of an exponentially growing bull market. It is worth mentioning that the indicator is currently turning from green to red (blue circle on the right), which also shows that "Black Friday" does not support a bear market .

“Black Friday” is nothing more than a “discount” in the crypto market, if you panic you lose.