The crypto market remains sluggish, but multiple Favourable Information may bring a turning point.

The crypto market in July failed to rebound as expected, instead further declining due to multiple pieces of Favourable Information. Events such as the German government's sell-off and the Mt.Gox repayments have exacerbated investor panic, leading to a drop in Bitcoin prices and a comprehensive decline in the entire crypto market. Despite the severe blow to the market, several Favourable Information factors are stacking up, including a repayment plan of up to $16 billion, rising expectations of interest rate cuts, and the U.S. elections, which may bring a turning point for the market in the fourth quarter of 2024.

Current Important Unfavourable 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, with potential selling pressure of 142,000 BTC and 143,000 BCH causing panic in the market on June 24, leading to the BTC price dropping to around $60,000. After the compensation officially started on July 5, BTC fell below the support level of $60,000. During this period, signs of surrender appeared among BTC miners, which usually indicates that the price has bottomed out.

Some analysis suggests that the current cryptocurrency leverage is close to historical highs. The market may experience a more extreme pullback to the $40,000 range, which could cause significant damage to the market and may require several months of volatility/downward trend before a reversal occurs.

The German government sells off: liquidates nearly half

The German government has transferred over 10,000 bitcoins in batches to exchanges and market makers, causing the price of bitcoin to briefly fall below $55,000. Data shows that the German government's selling plan is nearly halfway complete, with its bitcoin holdings reduced from nearly 50,000 coins to 27,461 coins, currently valued at approximately $1.5 billion.

Despite the market downturn, the inflow amount of digital asset investment products reached $441 million last week, with Bitcoin investment products accounting for 90%. The funds mainly came from the United States, Hong Kong, Switzerland, and Canada, while there was an outflow of funds from Germany.

The Bitcoin mining market is currently bottoming out.

Recently, the price of Bitcoin has dropped to $54,000, putting immense pressure on miners whose profits have plummeted due to the halving. Surveys show that at this price, only a few high-efficiency mining machines can be profitable. To address cash flow issues, mining companies continue to sell off their assets, with 30,000 Bitcoins from miners entering the market in June.

As the price of Bitcoin declines, small and medium-sized mining farms are gradually shutting down, and the difficulty of Bitcoin mining is rapidly decreasing, which may soon end the miners' surrender. On July 9, the difficulty of Bitcoin mining was reduced by 5% to 79.5T, with the average hash rate across the network over the past seven days being 586.72EH/s. Since May, the amount of Bitcoin sold by miners to exchanges has significantly decreased, and the over-the-counter trading volume has noticeably declined.

Favourable Information Worth Noting

The FTX repayment plan is expected to drive the crypto market to new highs.

FTX expects the total value of the allocable assets to be between $14.5 billion and $16.3 billion, exceeding its liabilities. Creditors need to vote by August 16, and the judge will decide whether to approve the plan on October 7. Once approved, FTX will repay creditors within two months, with an expected timeframe from Q4 2024 to Q1 2025.

Some analysts believe that this funding of up to $16 billion will flow into the crypto market and become a major catalyst for price increases. Bitcoin is expected to possibly break $120,000, Ethereum to surpass $12,000, and other altcoins may rise by 10 to 50 times.

The expectation of interest rate cuts is clear.

Federal Reserve Chairman Powell stated that inflation pressures in the United States have eased, but a rate cut decision still requires more data support. As the latest economic data from the U.S. shows a slowdown in growth, market expectations for a rate cut are rising. As of July 9, the market expects the probability of the Federal Reserve cutting rates at the September meeting to rise to 73.6%.

encryption accounting system is about to take effect

The first edition of the accounting rules for cryptocurrency issued by the Financial Accounting Standards Board of the United States will take effect for fiscal years beginning after December 15, 2024. This means that companies holding cryptocurrency will be able to record the highs and lows of their cryptocurrency holdings, promoting further compliance in the crypto market and gaining liquidity injections from mainstream financial markets.

Bitcoin Price Trends After Each Halving

Market trends are nothing more than rising, falling, and oscillating. If the market breaks through the current resistance level and stabilizes above 69,000 points, it can be considered the beginning of a rising market. Two scenarios may occur:

1. Hit the previous high but did not break through: The market approaches the previous high but fails to break through or slightly breaks through and then retraces. At this time, do not chase the high, and consider reducing some positions.

2. Breaking previous highs and sustaining new highs: If the market breaks previous highs and sustains for more than 3 days, attention should be paid to the strength of the breakout. If the trend is strong, it is advisable to hold positions and observe; if the trend is slow, it is recommended to reduce positions at new highs to guard against the risk of false breakouts.

The possibility of continued increase is currently low. If the second scenario occurs and the trend after the breakout is not strong enough, one must be wary of the risk of a sharp decline.

The market conditions before and after previous halvings show that Bitcoin tends to experience a pullback around the halving. After the second halving (July 10, 2016), the price dropped by 30% before starting to rise. After the third halving (May 12, 2020), the market experienced fluctuations until late July when it broke out upwards, going through 3 months of sideways movement and two pullbacks of more than 10% during that period.