Is the bitcoin bull market over?

OKX:http://ok.b615.com/6/

Slightly different from the previous callbacks, this decline was not only the largest, but also fell below the 120-day Moving average index (MA120) for many times, once approaching the 200-day moving average index. This situation is the first time since the market started in September last year. More importantly, from the perspective of technical analysis, MA120 is generally regarded as the key indicator of the mid-term market turn, while MA200 is regarded as the dividing line between bull and bear. When bitcoin prices come here and fail to stand back above MA120 for several days in a row, investors will inevitably speculate: Is the bull market still there? -Although only a month ago, the market was full of optimistic expectations that Bitcoin would rise to $100,000 after reaching a new high, this did not affect the spread of panic today.

Why is there a speculation that the bull market is still there?

In addition to the technical signals mentioned above, there are other signals worthy of vigilance in the market. For example, the number of bitcoin in the exchange address has continued to increase recently, and the number of giant whales has decreased. In the article "Goldman Sachs Layout Bitcoin Market, Risks and Opportunities Coexist in the Aftermarket" on the 12th of this month, we have focused on these two data, and today we will review them again.

The above figure shows the change of bitcoin balance in the exchange address since February this year. As of 12: 00 on May 18th (Beijing time), the value was 1,951,300, while on May 12th it was 1,860,000, which means that nearly 100,000 bitcoins flowed into the exchange in a week.

Let's look at the changes in the number of giant whales holding more than 1000 bitcoins. On the 12th, we observed 2181 addresses, but today this number has been reduced to 2150. The trade-off between the two data is obviously more reasonable to interpret it as the whale selling bitcoin. If this interpretation is established and this trend can be sustained in the next time, it can be predicted that the selling pressure in the secondary market will be bigger and bigger. Of course, this is only one case about the change of these two data, and we will discuss other possible cases in the second section of this article.

In addition to the transfer of bitcoin on the chain, we have also observed similar changes in the derivatives trading market. For example, on the Ouyi OKX platform, the basis between the current season contract and the next season contract of Bitcoin has been narrowing since Bitcoin hit a new high.

Similarly, in the bitcoin-based quarterly contract, the basis narrowed from $10,798.85 on April 14th (with a basis rate of 17.04% on that day) to $2,387.76 on May 18th (with a basis rate of 5.28% on that day), with a decrease of 69%.

It is generally believed that the contract premium in the derivatives market reflects the trend judgment of market participants on the future market. The higher the premium, the higher the market expectation of bullish outlook. In fact, in Ouyi OKX bitcoin currency standard seasonal contract market, from mid-December 2020 to mid-April 2021, the basis rate remained above 5% for most of these four months, and this time, the basis rate of 0.7% also appeared for the first time since December 10, 2020 (the basis rate of that day was 0.6%), which also reflected the market's dissatisfaction with the market outlook to some extent.

Can we declare the bull market over now?

In the book "Futures Trading Strategy" by legendary Wall Street trader stanley kroll, he mentioned a point: Let the trend be your friend. In the real market, most investors often lack enough time and patience to judge the trend, grasp the trend and make friends with it, but more will be influenced by market sentiment and make investment decisions under the influence of sentiment. Although everyone who enters the encryption market has more or less heard the famous saying that "trading is anti-human", in fact, very few people can practice it. Therefore, the more complicated the situation, the more they need to return to the market itself and reduce the emotional gain as much as possible. It is the best coping strategy to judge complex situations with the simplest logic.

For example, Musk, which has been controversial recently, many investors blame Musk's "Twitter speculation" for the recent week's bitcoin decline. It seems impeccable from the emotional level, but it is worth careful screening at the logical level. First of all, Bitcoin has been developing for 12 years since its birth. At present, it has become a behemoth with a total market value of one trillion dollars, and its possibility of being manipulated has gradually decreased with the increase of market value. At the same time, the good liquidity of Bitcoin has attracted many traditional financial giants including Grayscale, microstrategy and JPMorgan Chase to enter the market in recent years. Secondly, from the perspective of the value of positions, neither the bitcoin held by Musk personally nor the bitcoin held by Tesla is enough to cause fluctuations of more than 1% on the whole market. Combined with the flow of bitcoin on the chain in the past month, this decline is more likely to be caused by the accelerated sale of giant whales with the help of Musk's Twitter, which led to a chain reaction among retail investors. As for what role Musk played repeatedly in this process, it is not easy for an outsider to speculate.

Inserting the example of Musk here, I want to express a point that the current market volume of Bitcoin is no longer arbitrary by any individual or a few institutional investors. Therefore, for the judgment of the market outlook, we still need to focus on the most essential factor-whether there is a continuous inflow of funds.

Also in the article "Goldman Sachs Layout Bitcoin Market, Risks and Opportunities Coexist in the Aftermarket", we also mentioned the "water release" policies of several major economies, including the Federal Reserve and the European Central Bank, since the end of 2020. According to incomplete statistics, at least 7.9 trillion US dollars of incremental funds will flow into the market in the next three years, equivalent to 8 times of the current total market value of Bitcoin. If the inflation expectation in the United States can be stabilized at around 2% in the same period and the Federal Reserve does not introduce a sharp interest rate hike policy, it will be very good for most investment markets around the world, and Bitcoin will not be surprised to get a share.

Is that really the case? Let's observe the number of stable coins that have recently flowed into the exchange.

According to the statistics of glassnode, since January 2020, the number of USDTs in the address of the exchange has shown a steady upward trend. As a stable currency of USDT, the current balance of the exchange has exceeded 2.8 billion, and it can be seen from the above table that nearly 1 billion USDTs have flowed into the exchange in the last week. If other stable coins such as USDC and TUSD are included, the total amount of stable coins on the exchange address has exceeded 5 billion, which is undoubtedly a huge potential buying power.

Looking back at the topic we left in the first section about the change of the number of giant whales holding more than 1,000 bitcoins, if the cycle is lengthened, during the last bull market, that is, from October 2016 to February 2017, the number of giant whales also dropped significantly, and the number of positions did not reach the level of September 2016 until February 2019, but this did not affect the emergence of bitcoins seven months later.