The crypto market is experiencing significant fluctuations, with multiple factors influencing future trends.

The crypto market in July did not rebound as expected, but instead suffered a heavy blow. Negative news such as the German government's sell-off and Mt.Gox repayments intensified investors' panic, leading to a drop in Bitcoin prices and dragging the entire market down. Despite this, the combination of high repayment plans, rising expectations for interest rate cuts, and the U.S. elections has led some analysts to believe that the crypto market may start to see a turnaround in the fourth quarter of 2024.

Current Important Bearish Factors

Mt. Gox compensation triggers market panic: Bitcoin price plummets

The compensation issue of the Mt. Gox incident has attracted significant attention from the market. The potential selling pressure from a large number of bitcoins and bitcoin cash triggered panic in the market on June 24, causing the BTC price to drop to around $60,000. With the official start of compensation on July 5, BTC broke below the $60,000 support level under heavy pressure.

During this process, BTC miners are showing signs of surrender. Historical experience indicates that this usually means the price has hit the bottom. The last comparable drop in hash rate occurred in 2022, when the trading price of Bitcoin was $17,000.

Some analysts believe that the current cryptocurrency leverage is close to historical highs. We may see a more extreme pullback to the $40,000 range. Such a pullback could cause significant damage to the market and may require several months of fluctuation/downward trend before a potential upward trend reversal can occur.

German government sells off: clearing nearly half

The German government transferred over 10,000 bitcoins in batches to exchanges and market makers, causing the price of bitcoin to briefly drop below $55,000. However, according to data, by the end of the US stock market trading session, the German government address had reclaimed 2,898 bitcoins, worth approximately $163 million.

Data shows that the German government's sell-off plan is nearly half complete. Since starting the sell-off last month, its Bitcoin holdings have decreased from nearly 50,000 to 27,461, with the current value of the holdings being approximately $1.5 billion.

Despite the market decline, data indicates that the inflow amount of digital asset investment products reached $441 million last week. Among them, Bitcoin investment products accounted for the largest share of the total inflow of crypto products, with a proportion as high as 90%. By region, the inflow of funds mainly came from the United States, amounting to $384 million.

The Bitcoin mining market is bottoming out.

Recently, the price of Bitcoin has dropped to $54,000, making survival even more difficult for miners whose profits have plummeted due to the halving. Surveys show that if the price of Bitcoin falls to $54,000, only ASIC miners with an efficiency exceeding 23W/T will be able to make a profit, and only a few models of miners can barely sustain that.

The selling behavior of miners is also considered to be part of the reason for this price decline. In response to cash flow issues after the halving, mining companies continue to sell, with 30,000 Bitcoins from miners entering the market just in June.

Fortunately, as the price of Bitcoin declines, small and medium-sized mining operations are gradually shutting down, and the difficulty of Bitcoin mining is rapidly decreasing, signaling the end of miners' surrender. On July 9, data showed that the difficulty of Bitcoin mining was adjusted down by 5% to 79.5T, with the average hash rate of the entire network over the past seven days at 586.72EH/s. Since May, the amount of Bitcoin sent to exchanges for sale by miners has significantly decreased, and over-the-counter trading volume has noticeably declined.

Positive Factors Worth Noting

A certain platform's repayment plan is likely to drive the market to new highs.

According to a revised reorganization plan and disclosure statement submitted to the bankruptcy court in Delaware, USA, the total value of assets expected to be collected and converted into cash for distribution is between $14.5 billion and $16.3 billion, exceeding the $11 billion owed to customers and other non-government creditors. The excess cash will be used to pay interest to the company's more than 2 million customers.

Currently, the platform has received court approval, and creditors can choose to vote on the compensation plan for the encryption currency either in cash or in kind. Creditors must vote by August 16, and the judge will decide whether to approve the plan on October 7. Once approved, repayment will be made to creditors within two months, with the expected time frame being from the fourth quarter of 2024 to the first quarter of 2025.

Some analysts believe that, given that most customers are cryptocurrency enthusiasts, this amount of up to $16 billion will enter the crypto market and become a major catalyst for price increases. Bitcoin is expected to break $120,000, Ethereum will break $12,000, and other altcoins will increase by 10 to 50 times.

The expectation of interest rate cuts is clear.

The Federal Reserve's decisions on interest rate hikes and cuts are one of the important factors influencing Bitcoin prices, and rate cuts usually lead to a stronger market.

Recently, the Chairman of the Federal Reserve stated that inflationary pressures in the United States have eased somewhat, but more data is needed to prove that the inflation risks have passed before deciding to lower interest rates. If interest rates are lowered too early, inflation may rise again; if lowered too late, it could lead to a slowdown in economic growth or even trigger a recession.

Although the timing of interest rate cuts has not yet been determined, market expectations for rate cuts are rising as the latest U.S. economic data shows a slowdown in economic growth. According to the interest rate monitoring tool, as of July 9, the market expects the probability of the Federal Reserve cutting rates at the September meeting to rise to 73.6%, while the probability of maintaining rates is 22.9%.

The encryption accounting system is about to take effect.

In December last year, the Financial Accounting Standards Board (FASB) in the United States announced the first version of accounting rules for encryption digital currencies, requiring companies holding Bitcoin or Ethereum to record their currency fluctuations at fair value and reflect them in net income. The new regulations will take effect for fiscal years beginning after December 15, 2024, and will apply to both public and private companies for the year 2025.

For crypto assets, this change in accounting standards means that multiple companies will be able to record the highs and lows of their cryptocurrency holdings. This will drive further compliance in the crypto market and attract liquidity injections from mainstream financial markets.

Bitcoin Price Trends After Each Halving

There are only three types of market trends: rising, falling, and fluctuation. No matter how the future market changes, it ultimately cannot escape these three patterns. It is unwise to attempt to predict the market direction; we only need to know how to respond if the market develops in a certain direction.

If the market breaks through the current resistance level and stabilizes above 69000 points, it can be seen as the beginning of an upward trend.

Two possible scenarios for an increase:

1. Impacting the previous high but not breaking through: The market may be approaching the previous high but has not been able to break through, or it may have only slightly broken through and then retreated. In this case, do not be misled by the market's false appearances, and do not chase the highs. You may not even need to exit; just reduce your position slightly, especially if you feel your holdings are too heavy.

2. Breaking through the previous high and maintaining new highs: If the market breaks through the previous high and maintains new highs for at least more than 3 days. At this time, pay attention to the strength of the breakout, observing whether there is a strong rally or a fluctuating upward movement within 3 days to a week. If the trend is strong and rises quickly after the breakout, you can hold your position and wait for a significant pullback (at least around 10% pullback) to add to your position. If the trend is weak and the increase is slow, it is recommended to reduce your position at new highs to prevent a false breakout.

At present, the likelihood of continued price increase is low. If the second scenario occurs and the trend after the breakout is not strong enough, be cautious of the risk of a significant decline.

References of the market conditions before and after the previous halvings:

Second Halving (2016.07.10)

Before this halving, Bitcoin surged 78% in one month. After the halving benefits materialized, it experienced a deep pullback, dropping 30% within a week, with a maximum decline of even 40%. Then it started to rise all the way, increasing from less than $500 to nearly $20,000. After the halving, the coin price corrected by 30%.

Third Halving (2020.05.12)

In 2020, due to special events, the market fell sharply before the halving. If we do not consider this bearish news, Bitcoin also experienced a 20% correction in the week before the halving. There was a rebound after the halving, but it did not rise significantly, and the market went through fluctuations. From the peak before the halving in early May, it fluctuated until the end of July before breaking upwards, oscillating for a full 3 months, with two corrections of more than 10% occurring in between.

From the previous two halvings, it can be seen that Bitcoin tends to experience a pullback both before and after the halving. Currently, the market generally expects Bitcoin to rise after the halving, but what will happen this time? Further observation may be needed.