jakiro
Written by: 0xWeilan
After 15 years of development, the BTC and Crypto industries have entered the stage of large-scale adoption from technological research and development and marginal market verification.From little-known and infamous to storms and sunshine, the path and form of its realization are often unexpected.
Everything seems accidental, but it seems all inevitable.
Following the January BTC ETF approval, the US SEC once again unexpectedly announced its approval of eight ETH ETFs on May 23.Because the market had previously defaulted that the approval of ETH ETF was delayed until the second half of the year, unexpected positive factors suddenly pushed BTC and ETH, which were in a weak state, rebounded by more than 11.4% and 24.83% respectively.
In the long process of large-scale adoption of BTC and Crypto, the transformation of traditional finance and regulatory agencies has brought huge impetus to the development of the crypto industry and market.In Crypto, the Democratic Party’s “unexpected” turnaround not only shows that the influence of the 50 million Crypto holders in the United States cannot be underestimated, but also shows the policy impact of the massive entry of traditional financial institutions represented by BlackRock..
US Policy
On May 23, the U.S. House of Representatives passed the Financial Innovation and Technology for the 21st Century Act (also known as FIT21).In the long run, the adoption of the FIT21 Act will drive the development of the Crypto industry far beyond the approval of BTC ETFs and ETH ETFs.
For the crypto industry, the institutional affirmation and protection that the FIT21 Act will bring far-reaching impact.The bill provides a path for the safe and efficient launch of blockchain projects in the United States; clarify the regulatory boundaries between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) based on the securities or commodities;Regulations targeting cryptocurrency exchanges and protecting U.S. investors by establishing implementation of trading rules.
After the House of Representatives passes the FIT21 bill to be reviewed by the Senate, and if approved, it will be submitted to the US President for review.The approval of the FIT21 Act will take time and it will take longer to implement it.However, its breakthrough significance has been initially demonstrated, and the institutional recognition and promotion of the Crypto industry in the United States has shown that the Crypto industry, which has resolved the legitimacy crisis, has become one of the key industries developed in the United States.
Macro Finance
In early May, the United States released economic data for April – unemployment rate and non-farm employment data were far lower than market expectations, resulting in an increase in interest rate cut expectations and driving the US dollar index to decline. The three major U.S. stock indexes that saw a sharp decline in April rebounded strongly.In addition, with the support of Nvidia’s financial report that exceeded expectations, the Nasdaq Index rose 6.88% in a single month, regaining its April decline and hitting a new record high.
In May, the Nasdaq rose 6.88%, regaining all losses in April and hitting record highs.
In the middle of the month, the Federal Reserve continued to make hawkish remarks, suppressing expectations of the frequency of interest rate cuts and the frequency of interest rate cuts, causing the market to fluctuate.However, a moderate recession in the US economy has made market participants believe that interest rate hikes are difficult to happen, and it is only a matter of time before interest rate cuts are achieved.Goldman Sachs expects the start time of interest rate cuts to be postponed from July to September, and the current market trend can be regarded as reflecting this expectation.
If there is no abnormal economic data in the future, it is expected that the long trend of US technology stocks will not change.
Crypto Market
In May, BTC opened at $60,621.20 and closed at $67,472.41, up 11.3% for the whole month, with an amplitude of 25.54%.
BTC monthly trend
As the Nasdaq achieved strong recovery of April’s decline, BTC performed relatively weakly in May. After a huge fluctuation, trading volume failed to effectively amplify, leaving a long upper and lower shadow line on the trend.The biggest gain is that it effectively recovered after falling out of the top box at the beginning of the month and returned to the fluctuation range of US$58,500 to US$69,500.
Although the fundamentals of on-chain activities continue to deteriorate, prices have effectively rebounded, and the support of macro finance, industry, and capital dimensions has temporarily put the concerns about the end of the bull market.
BTC daily trend
In this cycle, the BTC upward momentum has gone through three stages, including inventory replenishment, BTC ETF approval and fund inflow driven stage after BTC ETF operation.As of the end of May, intra-market capital inflows have slowed down significantly except for ETF channels.EMC Labs judged that in May, the rebound in BTC prices was mainly driven by the linkage effect brought about by the strong rise in ETH.
On-site industrial capital shows signs of flowing from BTC to ETH, which can be confirmed by the amplified trading volume of ETH/BTC trading pairs after May 15.
The trading volume of ETH/BTC trading pairs is significantly increased
The reverse flow of industrial capital indicates that the price discovery of BTC in the future market will be mainly determined by the inflow of funds from the BTC ETF channel and whether the in-market amount of funds are taken.
During the progress of the bull market, long-term hands gradually sold BTC held in batches to the market, while short-term hands attracted by prices who are determined to outperform the market in the short term continue to increase their positions.
Since December, this trend of “from long to short” has continued until it reversed in May.This month, the long-hand group overall changed from selling to accumulated state and increased by 93,400 BTC, while the short-hand group began to reduce their positions and sold 38,200.
Long hand, short hand, CEX, miner position status (graphical by EMC Labs)
As the miner group entered the first month after the halving, both the block reward and transfer consumption revenue declined, and the revenue decreased significantly to US$963 million (Statistics by The Block).EMC Labs found that under the pressure of sharp decline in revenue, miners were forced to make two moves this month, one was to sell inventory and sell accumulated 6,000 BTC to the market, and the other was to reduce the supply of computing power.
With the price drop, Bit Network lost up to 28% of its computing power after reaching its peak on April 23.
Bit network computing power statistics
Currently, the miner group holds 1.8 million BTC, and there has not been a large-scale sell-off since this bull market. If the market declines in succession, in order to maintain mining operations, the miner group may sell off to promote a weak balanced market downward.
Market supply
During the progress of the bull market, long-term hands gradually sold BTC held in batches to the market, while short-term hands attracted by prices who are determined to outperform the market in the short term continue to increase their positions.
Since December, this trend of “from long to short” has continued until it reversed in May.This month, the long-hand group overall changed from selling to accumulated state and increased by 93,400 BTC, while the short-hand group began to reduce their positions and sold 38,200.
Long hand, short hand, CEX, miner position status (graphical by EMC Labs)
As the miner group entered the first month after the halving, both the block reward and transfer consumption revenue declined, and the revenue decreased significantly to US$963 million (Statistics by The Block).EMC Labs found that under the pressure of sharp decline in revenue, miners were forced to make two moves this month, one was to sell inventory and sell accumulated 6,000 BTC to the market, and the other was to reduce the supply of computing power.
With the price drop, Bit Network lost up to 28% of its computing power after reaching its peak on April 23.
Bit network computing power statistics
Currently, the miner group holds 1.8 million BTC, and there has not been a large-scale sell-off since this bull market. If the market declines in succession, in order to maintain mining operations, the miner group may sell off to promote a weak balanced market downward.
Money flow
Since this cycle, stablecoins have achieved net inflows in October 2023 to boost the market’s impetus. The inflow scale hit the highest and new highs since the cycle in March and April this year, becoming a liquidity impact caused by large-scale BTC profit realization.The important force of the company (the other force is fiat currency funds in the BTC ETF channel).
By May, with huge chip exchanges and violent market fluctuations, coupled with delayed interest rate cuts, the inflow rate of funds in the stablecoin channel dropped significantly.According to EMC Labs statistics, stablecoin capital inflows in May were only US$341 million, far lower than 8.9 billion and 7 billion in April.
Monthly changes in major stablecoin supply (graphical by EMC Labs)
Compared with the two major stablecoins, USDT inflows of 1.394 billion this month, while USDC recorded 973 million outflows for the first time in five months, indicating that the trend changes in stablecoin channel funds in the US region are more sensitive than those in the Asian region.
May 11 BTC ETF Flows (Picture by SoSo Value)
EMC Labs observed fiat currency funds in the ETF channel and found that it was outflowed in 5 trading days of May 22 trading days, and recorded net inflows in 17 trading days, with a net inflow of US$1.905 billion for the whole month, far higher than the stablecoin channel.$3.41 inflow.
As of the end of May, the assets held by 11 BTC ETFs in the United States have reached US$58 billion, holding 852,256 BTC coins to 4.32% of the total supply, becoming an important force in controlling BTC prices.
Conclusion
In the April report, we judged that the market entered a bull market relay state, and the first wave of large-scale chip exchanges (March to April) have occurred.Throughout May, long-term and short-term trading fell sharply, market supply returned to “from short to long”, and the exchange’s existing BTC returned to the outflow state, marking the BTC market entering a weak equilibrium state after passion venting.
We maintain our judgment that on-market capital has shown a trend of migration from BTC to ETH, and the “Ethereum time” will continue. The subsequent trend of BTC depends on US macroeconomic data and the Fed’s market voice.
BTC, which is in a weak equilibrium state, does not actually require too much capital to drive the upward trend.The possible buying power comes from the joint effects brought by the popularity of ETH ETF approval, and on the other hand, it comes from fiat currency funds from the BTC ETF channel.With its continued growth in scale and its pace of frequency with the Nasdaq, fiat currency funds in the BTC ETF channel may become an independent force that affects BTC prices.
