The market plummeted and the bulls left again?

In this round of sharp decline, the bulls in the futures contract market suffered heavy losses. According to the data from Hetongdi at 2 pm on May 13, the total amount of liquidation in the crypto asset market within 24 hours was US$2.56 billion, setting a record for the highest liquidation amount in the past 20 days, among which the proportion of long liquidations exceeded 80%.

Some analysts believe that Tesla founder Elon Musk’s tweet on the morning of the 13th about Tesla suspending its acceptance of BTC payments was the trigger for the market to accelerate downward movement. Elon Musk changed his face and said that cryptocurrency is a good idea, but mining has brought damage to the environment.

In addition, the rise in the US CPI (Consumer Price Index) has brought negative impacts to the US stock and crypto asset markets. On the 12th, the US Department of Labor released data showing that the US CPI rose 4.2% year-on-year in April, significantly exceeding the previous market expectation of 3.6%, and the growth rate was higher than during the 2008 financial crisis.

The accelerated rise in CPI often means increasing inflationary pressure. Industry insiders are worried that the United States may tighten its monetary policy ahead of schedule, and once the demand for risk aversion is released, it may accelerate the pace of the bull market turning into a bear market in the crypto asset market.

The market plunged 20%, and Musk's "face-changing" may be the cause

From May 12 to 13, the crypto asset market once again experienced a bleak moment. BTC began to decline continuously at noon on the 12th, falling from $57,900 to a minimum of $45,750, with the price of a single coin shrinking by $12,150 and the maximum drop reaching 20.98%.

BTC led the decline, and other mainstream assets also plummeted. ETH fell from $4,332 to a minimum of $3,500, with a maximum drop of 19.2%, while LTC fell from $393 to $301, with a short-term drop of 23.4%.

As of 2:00 p.m. on May 13, the entire market rebounded, and BTC rebounded to around $51,000, but it was still down 12% from the previous day's high.

The sudden plunge has made investors nervous. In the fierce competition between long and short positions, many people panicked and sold, and the debate over whether the bull market has ended has started again. The comment section of various big V bloggers in the industry is full of questions such as "Is the bull market still there?" After the sharp drop, some people chose to clear their positions or reduce their positions to avoid risks, while others were busy buying at the bottom, hoping that the market would reach a new high again.

Compared with spot holders, investors who went long in the futures contract market in the past two days have undoubtedly suffered the most. According to the data from Hetongdi at 2 pm on May 13, the total amount of funds liquidated in the crypto asset market within 24 hours was US$2.56 billion, setting a record for the highest liquidation amount in the past 20 days. A total of 224,688 investors' positions were liquidated across the network, of which more than 80% were long positions.

Amid the volatile market, market participants hoped to find the cause of the market crash. A tweet from Tesla founder Elon Musk was regarded as the "culprit" by market investors.

Elon Musk announces Tesla will stop accepting BTC payments

On the morning of May 13, Musk announced on his personal Twitter that Tesla would stop accepting BTC payments. He said that BTC mining has led to a sharp consumption of energy such as oil and coal. Although cryptocurrency is a good idea from many aspects, it cannot be at the cost of damaging the environment. He also revealed that Tesla will not sell Bitcoin for the time being and will seek cryptocurrencies with lower energy consumption.

Judging from the market trend, BTC did accelerate its decline after this tweet was released. Musk and Tesla's powerful IP have demonstrated their influence on the crypto asset market, and investors have once again seen the influence of institutional trends on the Bitcoin market.

Some analysts believe that Tesla’s announcement of a suspension of BTC payments, given its holdings of BTC, is equivalent to a “suicide attack.” Many investors who have suffered losses due to the market decline have pointed the finger at Musk, believing that he is a “shit stirrer” in the crypto asset market.

Makoto Sakuma, a researcher at Nippon Institute for Advanced Research, believes Musk's enthusiasm for cryptocurrencies may be waning.

Although the crypto world advocates the spirit of decentralization, in today's crypto asset market, the attitudes of celebrities and big Vs towards crypto assets may still become a barometer of market trends.

US inflation exceeds expectations, financial markets wait and see monetary policy

During the sharp drop, the release of the US CPI (Consumer Price Index) in April may also have an impact on the trend of the crypto asset market.

On the evening of May 12, the U.S. Department of Labor released data showing that as the U.S. economic recovery got on track and energy prices soared, the U.S. CPI in April rose 4.2% year-on-year, significantly exceeding the market expectation of 3.6% before, and the growth rate hit a new high since September 2008. In addition, after excluding food and energy prices, the U.S. core CPI in April increased by 0.9% month-on-month, the largest increase since 1981, exceeding the financial crisis in 2008. After the news was announced, the 10-year U.S. Treasury yield rose to nearly 1.7%.

Generally speaking, faster CPI growth means that the level of inflation is also increasing. Affected by this, the three major U.S. stock indexes opened lower and fell throughout the day. The Dow Jones Industrial Average once fell by more than 710 points during the session, and technology stocks were sold off first.

As of the close of the U.S. stock market in the early morning of May 13, the three major stock indexes fell sharply. The Dow Jones Industrial Average fell by about 2%, the largest single-day drop since January this year; the S&P 500 fell by 2.14%, the largest single-day drop since February this year; the Nasdaq fell by 2.67%, of which Tesla's stock price fell by 4%.

Huang Han, partner of Wangong Capital, believes that the US CPI in April exceeded expectations by a wide margin, and inflationary pressure is surging. The US money market believes that the probability of an interest rate hike this year has risen to 88%, and global monetary tightening is imminent.

Previously, the demand for safe-haven funds brought about by the Fed's accelerated money printing was regarded by industry insiders as a key factor in the rise of the crypto asset market. Now, the increase in the US inflation level has caused some concerns about the early tightening of its monetary policy.

The Fed's attitude towards this is not clear for the time being. On the evening of May 12, Fed Vice Chairman Clarida said that the economy is still far from the Fed's goals and it will take some time to make further substantial progress. But he was surprised by the higher-than-expected inflation data and said that if price pressures were not temporary, the Fed would take action.

In the view of Mark Zandi, chief economist of Moody's Analytics, the rise in inflation largely reflects the reopening of the U.S. economy. "As the Fed has said before, the rise in inflation is temporary and the Fed will not change its current monetary policy because of this."

In any case, the sharp increase in the US CPI is not good news for the crypto asset market. Although the market seems to be temporarily stable, analysts believe that the Fed's decision has become a sword of Damocles hanging over the crypto asset market. Once the monetary policy is tightened, the speed of the bull market turning into a bear market will also accelerate.