Will the fourth quarter decline come as expected? What risks should we pay attention to at the end of the year?

There has been a lot of news in the cryptocurrency market recently, but few of them have had a big impact on the overall situation. PayPal's policy was actually expected before, and it is only a matter of time before Internet giants enter the cryptocurrency field in the future. In fact, the market has also given its own answer. Bitcoin has risen, but it still has not appeared like the situation in October last year. How will the market go in the future? This is an issue worthy of attention.

First of all, the current trend of the cryptocurrency market should not be analyzed separately. Since the beginning of the new crown pneumonia this year, the cryptocurrency market has actually begun to converge with the trend of the U.S. stock market. For a period of time, many people have discussed whether Bitcoin is a risky asset or a safe-haven asset. In fact, it is just a hint. In the end, most people tend to think that Bitcoin is both a risky asset and a safe-haven asset. This was basically not recognized before, but after the market fell several times, people generally recognized the price risks of Bitcoin.

For those who hoard coins, they naturally don't need to analyze market trends, because even for a relatively long time, those determined hoarders will basically not touch the cryptocurrencies in their hands. The main reason is that they have no consumption demand and their costs are relatively low compared to many people. Therefore, cryptocurrency is more like a "family heirloom". These people naturally don't need to fight in the market for short-term and medium-term interests.

However, for most people at present, coming to the cryptocurrency circle is actually for the purpose of maximizing profits and getting rich quickly. As latecomers, they also face more risks when taking over the cryptocurrency circle. At the same time, in the current trading market environment, there are a lot of altcoins on mainstream exchanges, and it is difficult to hold Bitcoin in this environment. In many cases, they are actually more accepting of the fact of altcoins. This will be common in the future. After all, the cost of issuing coins has been reduced and the market environment has also changed.

Speaking of market changes, if we look back at previous market trends, we will find an interesting phenomenon. Not only has Bitcoin shown a positive correlation with the U.S. stock market for a period of time, but what is more interesting is that we often find that the currency price is more likely to fall on Sundays. In fact, all of this can be explained by the environment of the entire market.

To put it simply, traditional institutions have already entered the cryptocurrency market and brought in huge amounts of funds that affect the market. This amount of funds will still have a certain impact on the market in the short term. For example, the 312 market situation we all know is actually a series of reactions caused by the decline in the external market. For example, a trading institution suffers huge losses in the U.S. stock market, bond market, or crude oil futures market. At this time, it needs to pay additional margin, so it may reduce its positions and holdings in the cryptocurrency market, which will bring about a sharp drop in the cryptocurrency market.

Another example is the so-called Sunday decline, which is actually based on a similar principle. Generally, there is no trading after the traditional market closes on Friday. However, since last year, the number of black swans in market changes has gradually increased. Therefore, in order to prevent black swans, many funds need to withdraw funds and then seek certain opportunities in the cryptocurrency market, which is what we call short-term trading. By Sunday, they will inevitably have a need to withdraw funds, so naturally, it will often show that there may be an increase on Friday and Saturday, and then a decline on Sunday afternoon.

Similarly, if we put this behavior into a year, then generally speaking, the first and second quarters are often times when market capital pressure is relatively small (generally after the Chinese New Year). For example, after the Lunar New Year, we basically believe that capital pressure is the smallest, and at this time most funds will choose to boldly deploy, while in the second quarter, there will generally be some market pulling behaviors, and most funds may reap profits in the second and third quarters. At the same time, in the semi-annual period, there will be behaviors of beautifying the financial reports of listed companies, and there will be short-term capital shortages. In the third quarter after the disclosure of the semi-annual report, there will be some short-term speculation by funds with lagging performance, and the fourth quarter is generally a concentrated period of cashing out, mainly for year-end settlement and beautification of annual reports and other market demands. At the same time, at this time, in terms of foreign exchange, the US dollar will be relatively scarce, and the end of the year is often the time when the RMB is under pressure, while in the second and third quarters, the RMB will show a strong performance.

Of course, these are basically some trends in previous years. This year, due to the new coronavirus pandemic, there are still some differences. The most important thing is the strong development of China's economy, which has made the RMB still strong so far. At the same time, the trade conflict between China and the United States and the massive money printing by the United States have put a certain amount of pressure on the US dollar. Not only that, the fourth quarter of this year will also face major events such as the US presidential election, which will have a major impact on the global economic trends in the next few years.

We can look at the trend of Bitcoin over the years to get some clues.

There was a big rise at the end of 2013, a big fall at the end of 2014, and a rise at the end of 2015

Rising at the end of 2016

It rose at the end of 2017, fell at the end of 2018, and fell at the end of 2019.

During this process, there were increases at the end of 2013, 2015 and 2016, and decreases at the end of 2014, 2018 and 2019. Taking into account that the early market development was not particularly mature, we mainly look at the period from 2017 to the end of 2019. In fact, the proportion of declines was still relatively high. At the same time, at the end of 2017, there was a sharp increase followed by a sharp decrease. In other words, once the market is mature enough, it is often likely to fall at the end of the year.

Of course, another interesting phenomenon is that we can basically see the shadow of a surge at the end of the year before the bull market. For example, the market was actually rising at the end of 2016. This was to a certain extent due to the halving of Bitcoin. The market may have certain bull market expectations. At the same time, Ethereum 1CO began to attract attention, so the market gradually became hot.

As for this year, if we simply apply it, we can basically think that the DeFi bull market in July and August is equivalent to the market at the end of 2016. In this way, it is possible that the market may rise at the end of the year. In other words, if the market trend is stable or there is no sharp drop at the end of this year, the possibility of a bull market next year will be greatly enhanced.

Of course, on the other hand, if the market shows a downward trend, it means that the Bitcoin market has begun to be "linked" with the traditional financial market. So if you want to speculate in the market in the future, you should not only pay attention to the cryptocurrency market, but also pay attention to changes in the traditional market. Once a black swan event like the new crown occurs, it is possible that there will be a short-term crash.

In addition, we should not forget the impact of the US election on the entire market. The current short-term situation will cause some funds to have a risk-averse demand. At the same time, the political situation in some regions is heating up, so the possibility of black swan events cannot be ruled out. In addition, the listing of Ant Group, with a valuation of nearly 100 billion, will have a relatively large impact on the market, so there will inevitably be fluctuations in the market.

Finally, if we make an overall assessment, market funds may face multiple pressures at the end of this year, especially in the fourth quarter. At the same time, the current hot spots in the cryptocurrency industry can basically not be maintained. Therefore, the probability of a decline in the fourth quarter will be greater. However, overall, we still need to wait for events such as the US election and the market's massive money printing to take place before making further judgments.