The explosion of liquid mining this summer is not accidental, because we are experiencing a global outburst of high risk appetite.
Written: 7
In the past 12 hours, BTC has fallen sharply by US$1,300. It once fell below the integer mark of US$10,000 this morning, and fell to a four-digit offer for the first time since July 27 this year. The sharp drop in BTC also led to a collective dive in the cryptocurrency market. Coinmarketcap data shows that at the same time, the total market value of the cryptocurrency market shrank from 367.4 billion U.S. dollars to less than 333.5 billion U.S. dollars. In just half a day, it fell by more than 34.1 billion U.S. dollars, a shrinkage of nearly 10. %. However, BTC’s market value accounted for a significant rebound of nearly 1%, which shows that compared to BTC, other assets in the crypto market have suffered even more damage during this wave of decline.
The total market value of cryptocurrencies, source: Coinmarketcap
This summer is very hot for the entire cryptocurrency market. It is true that gold hit a record high, and U.S. stocks are also “running against the current” under the raging epidemic environment, but a wave of liquidity mining boom that blew in June has brought the cryptocurrency market Still able to maintain a leading position in the general environment of the global financial market. During this period of time, BTC has risen by 30% from 9,000 and once exceeded the 12,000 US dollar mark, and a large number of DeFi tokens have achieved an amazing increase of ten times, twenty times or even hundreds of times in just two months. The more representative LINK has ranked sixth in the total market capitalization of the cryptocurrency market at the time of posting; LEND has risen more than ten times in two months, which is more than a hundred times higher than that at the beginning of the year; YFI has been insufficient in one month The 1,000 US dollars once soared to 44,000 US dollars per piece.
After experiencing a wave of collective recovery from March to May, why did we usher in such a seemingly abrupt double-jump outbreak during the period from June to August? And why did the market have such a large correction this week?
The extreme explosion of risk appetite in the global financial market has achieved “everything”
Perhaps when talking about these topics, someone will inevitably emphasize the flood irrigation of the major central banks in the world since the beginning of this year, or emphasize the geopolitical risks and the market hedging needs caused by the turmoil in the political environment of several major economies. Indeed, I admit that these factors do indeed. This is the main reason for setting the tone for the special 2020, but what I want to say is that if we only focus on the recent two-month market, these interpretations are actually too broad and more accurate. What is the answer?
Before the announcement, I want to list a few phenomena:
1. In the past week or so, the Russell 2000 index outperformed the S&P 500. During this period, the Russell 2000 index achieved a gain of nearly 9%, while the S&P 500’s gain was only about 5%. Stretched for more than half a month, the Russell 2000 index still outperformed the S&P 500.
Note: The Russell Index was founded by Frank Russell in 1972. The number of constituent index stocks in the Russell 2000 Index is 2,000, which is composed of the 2,000 stocks with the smallest market capitalization in the Russell 3000 Index. The total market value of these constituent stocks is only about one-tenth of the stock market value of the S&P 500 index, which can basically be understood as an index that counts the stock price movements of small and micro companies.
Source: Fred
2. Data from iShares iBoxx, an exchange-traded fund that specializes in junk corporate bonds, shows that the ETF has been in a state of net capital inflows since July this year. The last time a similar situation occurred needs to be traced back to 2014.
Source: Tradingview
3. Correspondingly, the yields of 10-year and 30-year long-term U.S. Treasury bonds continued to rise throughout August. Although there has been a significant decline in recent trading days, they are still basically above the average level since June this year. .
Yield on 10-year U.S. Treasuries, source: Tradingview
4. Bloomberg data shows that the cost of borrowing dollars for emerging market companies has continued to decline in the past few months, and at the time of publication, the value has fallen back to the level at the beginning of this year, approaching the low point of the year.
Source: Bloomberg
5. More intuitively, the price of gold has basically maintained a callback trend throughout August after it reached a record high of US$2075/oz in early August. As of the time of publication, the price of gold has fallen back to around US$1930/oz. , Has fallen by 7% since its high point just a month ago.
Source: Tradingview
What I want to express above, I believe you should be able to get some clues.
The answer is that almost all high-risk assets have achieved quite amazing results in the past two months or so. The market risk appetite has reached a very extreme level during this period. This situation is firstly related to major economies. The continuous release of water by the central bank has led to the continuous growth of liquidity in the market. Second, it has a very large relationship with the economic recovery of major economies such as China, the United States and Europe, which is obviously better than expected. Obvious control, coupled with the continued decline of the dollar, which greatly reduced the significance of cash allocation, the market quickly jumped from a conservative attitude to an extremely aggressive pursuit of high yields, thus creating a relatively “chic” market in the past two months surroundings.
DeFi liquidity mining is a unique high-risk and high-yield asset in the cryptocurrency market
From the perspective of the cryptocurrency market, what coincides with the “high risk appetite” is the liquidity mining trend led by Compound at the end of June. As traditional head currencies such as BTC and ETH that have basically formed a broad consensus, the market now has a relatively consistent understanding of their value.
For the DeFi project tokens that have emerged in recent months, there is actually a lack of real consensus. However, because liquid mining provides a considerable wealth growth effect, in an environment of high overall risk appetite in the market, the influx of funds has created a simultaneous surge in the price of related tokens other than the benefits provided by liquid mining. Now If you look back, is this exactly what we have just experienced in the past two months?
On the night that just passed, U.S. stocks plummeted, and cryptocurrencies plummeted. In the first few trading days of this week, the long-term U.S. bond yields turned down, which has actually given obvious risk warnings. The market is entering 9 Months later, or at least in the first few trading days of September, the extreme pursuit of high-risk and high-yield enthusiasm quickly cooled down, and with the withdrawal of liquidity, this highly consistent collective diving in the global financial market came overnight. .
The market has confirmed one point with actual actions, that is, the explosion of DeFi’s liquidity mining boom is not accidental. A sufficiently friendly environment provides DeFi with an excellent “time”, and when this high-risk preference is difficult to maintain for a long time After the environment changes, the test of DeFi will actually come. At least at this node, don’t “be blinded by “money”.”
Now this special node, risk> opportunity
For the market in the coming months of this year, the key words that have been talked about for a long time, such as the epidemic situation/economic recovery/central bank easing, are still the key. Perhaps the cryptocurrency market now overlaps with the traditional financial market from a human perspective. The degree is not high, but it must be recognized that the cryptocurrency market is still a capital-driven market, so the impact of the external macro environment on the market must not and cannot be ignored.
To put it simply, even without considering the performance of traditional major assets, if BTC falls further in a short period of time, the bubble that DeFi has accumulated in the extreme heat of the past few months will most likely usher in the first wave of bursting , Even those DeFi projects whose token economic model is good enough or have enough application value will inevitably be affected, so now this node must not rush in blindly and optimistically to buy the bottom. Observing the fluctuation of market sentiment is the most needed now. Things to do.
When blockchain practitioners laugh at the traditional financial market’s “old scholars” who cannot understand the future, don’t put yourself in a deep well that shields everything from the outside, because once so, you will become the one you once laughed at. Object.
Source link: mp.weixin.qq.com
