Bitcoin has emerged from its “darkest hour”, is it cautiously bullish at the high of $9,000?

On the morning of April 30, the price of Bitcoin briefly broke through $9,000, recovering all the losses since the plunge on March 12. Everyone couldn't help but exclaim, "This is a 'real' bull market."

Author | Qiu Yangtao

Source | Liandede

Bitcoin investors are excited again!

In the early morning of April 30, the price of Bitcoin continued to rise. After quickly breaking through $8,500, it continued to fluctuate around $8,800.

According to the quotes from the trading platform OKEx, on the morning of April 30, the price of Bitcoin broke through $9,000 in the short term. After rising 8.45% yesterday, it rose by more than 9.5% today, closing positive for five consecutive days. At the same time, this price also set a new high since March 7.

In the previous month, under the influence of the new coronavirus, risk assets were sold off worldwide, and the cryptocurrency market was not immune.

From the evening of March 12 to the morning of March 13, Bitcoin fell below the $7,000, $6,000, $5,000, and $4,000 levels, with a daily drop of more than 40%. That night, both long and short positions suffered heavy losses. According to ChainDD’s previous report, the entire network had a liquidation of $2.46 billion, or about RMB 17.4 billion, that day (8 a.m. on March 12 to 8 a.m. on March 13).

However, through this wave of increases last night, Bitcoin has recovered all the lost ground since the "3.12" crash. However, this time the "Air Force" has suffered. The statistical report of Hetongdi shows that as of 8 am today, the total liquidation of the contract market in the past 24 hours was US$452 million, and the long-short liquidation ratio was about 0.7.

The circle of friends began to get lively, and everyone couldn't help but exclaim, "This is a 'real' bull market." As of 10:30 on April 30, according to OKEx trading big data, the ratio of long and short positions in BTC contracts was 1.05, and the number of long positions in the market had a certain advantage.

Bitcoin price range trend; time: February 29th - April 29th

Cautiously bullish?

According to CoinMarketCap data, the overall market value of the cryptocurrency market was $139.3 billion on the morning of March 13. As of 9 a.m. on April 30, it rose to $250.6 billion, up $111.3 billion from March 13.

At the same time, the contract market also performed well. On Wednesday, April 29, U.S. time, the main contract of Bitcoin futures on the world's largest futures exchange, CME, rose by more than $1,000 in one day, closing above $8,800, a record high in more than a month and a half. The main contract rose last week, wiping out the cumulative decline of the previous week.

The most traded CME Bitcoin futures BTC May 2020 contract closed up $1,045, or 13.4%, at $8,825 on Wednesday, a record high for the main contract since March 6. It closed at $7,780 on Tuesday, the highest since March 11, and the main contract rose by about 5.4% last week. BTC June, July and August 2020 contracts all broke through $8,800 on Wednesday.

All maturity contracts rose between $1,045 and $1,075 on Wednesday.

Regarding Bitcoin's outstanding performance, Xu Kun, Chief Strategy Officer of OKEx, expressed caution. She told ChainDD: Analyzing from the logic of price, the market fluctuated up and down after "3.12", with repeated long and short explosions. Many people's chips were scattered, and the main players' chips became very concentrated. Last night's rise did not increase in volume, which also shows that many people are still hesitating and waiting, and may enter the market when the market rises again.

But at this stage, if there is another sharp rise in the market in the short term, I personally think we should be cautious.

According to CoinMarketCap data, ChainDD noticed that since the 24-hour Bitcoin transaction volume reached US$74.157 billion on March 12, the transaction volume has shrunk significantly, and the average transaction volume in the past month and a half has been US$38.544 billion.

Time range: February 29th - April 29th

Xu Kun pointed out that the short-term price of Bitcoin may deviate from its value, but in the long run, the price always fluctuates around its value. "In the long run, I personally firmly believe in Bitcoin and Ethereum, based on fundamentals and time.

Crypto assets are small in size, and once liquidity is loosened, this market can be quickly activated. Compared with other major asset classes, crypto assets have more advantages in the relative cycle, and the second half of the year is worth looking forward to. "

Regarding the changes in the secondary market of Bitcoin, Johnson, chief analyst of TokenInsight, told ChainDD that after the "3.12" crash, the market has basically returned to a rational level.

He said that the "March 12" crash was a market chain reaction caused by panic in global financial markets and a shortage of short-term liquidity.

At that time, we analyzed that the "March 12" sharp drop was irrational, so the market would at least recover some of the lost ground in the short term.

From March 12th to now, we have observed that the liquidity of the market has gradually increased, and the liquidity of some exchanges has returned to the level before the big drop, which represents everyone’s positive attitude towards the digital asset market.

What are the advantages of Bitcoin as an “alternative asset”?

Bitcoin has long existed as an "alternative asset" and has no obvious correlation with gold and emerging markets. However, Guosheng Securities also said that in recent years, it has received a lot of attention from the traditional capital market, and Bitcoin has a certain degree of interoperability with other assets in terms of liquidity and other aspects.

However, judging from the market reaction, the word "alternative" is a relative concept, and more and more people are gradually regarding this word as a unique advantage of Bitcoin.

Paul Donovan, chief economist at UBS, recently wrote in an article, "Economists are dealing with three levels of uncertainty: uncertainty about the virus; uncertainty about policy responses; and uncertainty about the economic response to the virus and to policies. Any change in any of these will directly change economic outcomes."

Amid all this uncertainty, Bitcoin’s roadmap is the only certainty, with the highly anticipated halving event coming up on May 12, so the coming weeks will be a critical period for Bitcoin.

Separately, a survey of Bitcoin investors showed that most were optimistic at the start of the year and expected Bitcoin prices to soar to over $20,000 in 2020.

A clear trend can be seen from the data of the research platform Glassnode. In recent times, the number of new investors pouring into the Bitcoin market has grown parabolically.

Note: The yellow line represents the number of non-zero Bitcoin addresses, and the gray line represents the Bitcoin price

According to the stock-to-flow (S2F) model, Bitcoin will be close to the scarcity of gold after the halving.

ChainDD Note: The S2F model is a value metric used to measure scarcity, created by Plan B. It is a ratio calculated by dividing the current supply of an asset by the annual production rate of new supply.

For example, the S2F ratio of gold is 62 and the S2F ratio of silver is 22. Currently, the S2F ratio of Bitcoin is 27, which has surpassed silver.

At the current rate gold is mined, it will take 62 years for the gold supply to double, making it extremely scarce. However, after Bitcoin’s halving in May 2020, the Bitcoin S2F ratio will double to about 52, making it closer to gold in scarcity.

According to the model, the expected price of Bitcoin after the halving will be around $55,000.

However, the S2F model is currently controversial and controversial. Most analysts also point out that it is completely wrong to measure the value of Bitcoin only by its scarcity.

According to the S2F model, it should be a good time to buy Bitcoin before the halving, but on March 12, when Bitcoin plummeted, this model obviously failed. At that time, PlanB tweeted a quote from the 19th-century British logician Carveth Read, who admitted that predictions are not always correct.

Recently, Bloomberg released an in-depth report titled "Bitcoin Maturity Leap", which directly pointed out that "Bitcoin is brewing a large-scale bull market."

The report pointed out that the correlation between Bitcoin and gold was initially pulled down by the decline in the stock market, but now, as global central banks have implemented unprecedented quantitative easing policies, the correlation between Bitcoin and gold has reached an all-time high.

"The current correlation between Bitcoin and gold has reached its highest level since 2010." The report pointed out that the correlation between Bitcoin and gold is twice the correlation between Bitcoin and stocks. In the past, Bitcoin was a means of speculative appreciation, but now it has transformed into a value storage mechanism similar to gold, and its maturity is being further improved.

Johnson, chief analyst at TokenInsight, pointed out that the current rise and fall of encrypted digital assets has a relatively high correlation with the traditional financial market. "We believe that market investors should still maintain a cautious attitude. The market surge in the past two days does not necessarily mean a bull market or the fulfillment of the halving expectations."

Getting through the worst

Let’s look back at the traditional securities market.

On Wednesday, Eastern Time, the three major U.S. stock indexes opened higher and closed higher, with the Dow Jones Industrial Average up more than 500 points, the Nasdaq up 3.57%, and the S&P 500 up 2.66%. As of the close, the Dow Jones Industrial Average rose 532.31 points, or 2.21%, to 24,633.86 points; the Nasdaq rose 306.98 points, or 3.57%, to 8,914.71 points; and the S&P 500 rose 76.12 points, or 2.66%, to 2,939.51 points.

Major U.S. stock indices; closing price on April 29, U.S. time

On the news level, the U.S. Federal Reserve announced on the 29th that it would maintain the target range for the federal funds rate at an ultra-low level of zero to 0.25%.

Federal Reserve Chairman Powell said that the market believes that U.S. interest rates will remain at zero for some time, which is appropriate; there is no rush to raise interest rates or withdraw measures to support the economy.

After the Federal Reserve announced its interest rate decision, spot gold surged to $1,708.58 an ounce before falling back.

In terms of European stock markets, the UK FTSE 100 index rose 2.77%, the German DAX30 index rose 2.85%, the French CAC40 index rose 2.32%, and the Euro Stoxx 50 index rose 2.12%.

The domestic A-share market was also strong. On the last trading day before the May Day holiday, the three major indexes were high, with the Shanghai Composite Index hitting a new high since the rebound on March 19.

Recently, the CBOE Volatility Index (VIX), which measures the degree of market panic, fell nearly 7% to 31.27 points, indicating that the degree of market panic has decreased. It can be seen that as the global epidemic situation gradually improves, the global financial market has shown signs of strengthening.

From a global perspective, although it will take some time to completely recover from the impact of the epidemic, it is clear that people have passed the worst period.