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On January 11, the continuously rising crypto market ushered in a “bloodbath”.
Profit withdrawal AND hedging measures
In the beginning of 2021, Bitcoin ushered in a big rise and once set a new high, but the upward trend ushered in challenges 11 days later. As of 14:11 on the 11th, data showed that BTC fell short-term, falling below the $34,000 mark, and the intraday drop reached 14.31%. Why is there such a big drop in the day when the halving market is stimulating, the international situation changes, the frequent entry of large institutions and the market sentiment is extremely optimistic about the crypto market?
Regarding the reason for the sudden drop of Bitcoin, Chu Kang, founder of Benrui Capital and co-CEO of ForTube, pointed out in an interview that the short-term sharp drop of Bitcoin was considered by many to be the result of excessive market profitability. The resulting adjustment. But the deeper reason is because of the uncertainty of the current international situation, especially Trump and Biden in the United States, which are about to switch rights. According to the news displayed on the Internet, this period is full of huge uncertainties. Therefore, there has been a sharp correction in global commodity assets. This is also a hedging measure adopted by some mainstream investment institutions in the United States.
Bubble burst AND is about to enter the predicament stage?
William, the chief researcher of OKEx Research, pointed out that the main market force of Bitcoin has undergone structural changes, from the original institutional investors as the dominant to small and medium investors as the dominant.
I have analyzed this round of Bitcoin bull market before. There are two important time points:
First, in mid-October, Bitcoin stood firmly at the $10,000 mark.
Second, in mid-December, Bitcoin broke through the $20,000 mark, setting a new record high
From the beginning of October, after the first important point in time, the price of Bitcoin rose from $10,000 to $20,000. At this stage, the main force of market rise is traditional institutional users. These traditional giants entered the cryptocurrency market and bought a large number of bitcoins, bringing unprecedented heat and optimistic expectations to the market, and driving the rise of bitcoin prices.
When the price of Bitcoin broke the 20,000 U.S. dollar mark in December, a large number of investors began to pour into the cryptocurrency market, which once caused some cryptocurrency exchanges to experience stagnation or downtime, and the traffic of many cryptocurrency trading platforms increased. Several times. This shows that the main investment force in the market has undergone structural changes, and the former institutional investors have turned to small and medium investors. The salient features of this stage are that the market will experience irrational prosperity, speculation will be stronger, and price fluctuations will be more intense.
Some industry analysts always like to claim that Bitcoin is a “safe-haven asset”, but in fact Bitcoin is a high-risk asset. Moreover, as a special asset class, Bitcoin, unlike stocks or bonds, does not generate any predictable cash flow. The only way for investors to obtain returns is to increase the price of Bitcoin, which is more likely to form a speculative bubble.
According to Kindleberger’s classification, a typical asset bubble can be divided into five stages: incubation, prosperity, excitement, predicament, and panic. What was the situation in the previous few days? Consider the following data:
It took more than a month for Bitcoin to rise from USD 10,000 to USD 20,000;
It took nearly half a month for Bitcoin to rise from $20,000 to $30,000;
It took 5 days for Bitcoin to rise from $30,000 to $40,000;
This crazy rise reflects the fact that in the Bitcoin market, speculation has become the dominant factor, and the market is too fanatical. What is clear is that the Bitcoin market is already in the excitement stage of the bubble cycle and will soon enter the dilemma stage. The Bitcoin market will usher in a sharp drop — this is what we are seeing now. The price of Bitcoin has fallen from $40,000. To the current USD 33,000.
The driving factors for the market outlook still exist?
Although the market has experienced a slump, it is worth mentioning that the quantitative easing and institutional driving factors that have previously driven the crypto market still exist. US President Biden said on Twitter today: When you want to pay rent or buy food, $600 is not enough. We need a $2,000 economic stimulus check. It can be seen that the subsequent US economic stimulus and quantitative easing are still continuing. The driving factors for the market outlook still exist?
In addition, just yesterday, more than 6000 people tried to join Skybridge Bitcoin Fund of Skybridge Capital, which caused its network system to collapse and failed. In response, Skybridge Capital will hold its second conference call on January 12. Earlier news, Skybridge Capital has officially launched the Skybridge Bitcoin Fund. Anthony Scaramucci, the founder of Skybridge Capital and former US White House communications director, said in an interview recently, “I like the scarcity of Bitcoin: no one knows who invented it. This is the cleverness of its inventor. Place, but they only have 21 million tokens, so scarcity provides people with this anti-dilution quality, and, as you know, this is also the human mind-when something is scarce, people want It. We now have a historic opportunity to enter before the institution enters the venue. By December 31, 2021, the price of each token may be $100,000? I believe it can be.”
At the same time, Grayscale is also in action. Grayscale’s newly appointed CEO, Michael Sonnenshein, revealed that it will double the existing 24 employees and launch six new products in 2021, but he did not disclose the specific details of the related products (currently Grayscale has 10 A cryptocurrency fund with an asset management scale of 25 billion U.S. dollars).
Regarding the driving factors of the market outlook, Chu Kang, founder of Benrui Capital and co-CEO of ForTube, analyzed that before the US Senate election ended, the Democratic Party actually controlled the Senate. So far, Biden’s Democratic Party controls both the House of Representatives and the Senate at the same time, welcoming the “blue wave.” The “blue wave” means that the larger-scale fiscal stimulus plan supported by the Democratic Party is expected to land, especially the fiscal plan supporting the fight against the epidemic is expected to be implemented. The “blue wave” for the capital market means increased fiscal expenditures and continued monetary easing. With the promotion of vaccines, the US economic recovery is expected to increase. This will partially offset the negative impact of the Biden administration’s tax increases on corporate profits and future growth in technology. The plate may be affected again. Rhythmically, as currencies continue to loosen for a period of time, it is expected that global stock markets and commodities, including Bitcoin, will continue to rise for a period of good.