The crypto market remains sluggish, with multiple factors influencing future trends.

The crypto market did not rebound in July as expected after experiencing a slump in May and June. On the contrary, a series of negative factors intensified investors' panic, causing Bitcoin prices to drop and leading to a comprehensive decline across the entire market. Despite the significant blow to the market, the accumulation of multiple positive factors has led some analysts to believe that the encryption market may begin to see a turnaround in the fourth quarter of 2024.

The Main Challenges Facing the Current Market

Historical legacy issues have caused market turmoil.

The compensation issue of a certain trading platform has attracted significant attention from the market. The potential selling pressure of a large number of encryption assets triggered panic in the market on June 24, causing the price of Bitcoin to drop to around 60000 USD.

With the official start of compensation, Bitcoin has fallen below the support level of $60,000 under heavy selling pressure. During this process, miners have shown signs of surrender. Historical experience indicates that this usually means the price has hit the bottom. The last comparable hash rate decline occurred in 2022, when the trading price of Bitcoin was $17,000.

Some market analysts believe that most participants are unaware of the seriousness of Bitcoin's potential decline in the four-month volatility range. The current crypto market leverage is close to historical highs (excluding certain platforms), but the current situation is more complex. A more extreme pullback to the $40,000 range may occur, which could cause considerable damage to the market and may require several months of consolidation or downward trends (recovery period) before a reversal into an upward trend could possibly occur.

The government's sell-off intensifies market pressure.

The government of a certain country has transferred over 10,000 bitcoins in batches to crypto exchanges and market makers. This action caused the price of bitcoin to briefly fall below $55,000. However, according to information from data platforms, the government address of that country later reclaimed some of the bitcoins, mainly from several major exchanges.

Data shows that the government's sell-off plan has been nearly half completed. Since the sell-off began last month, its Bitcoin holdings have decreased from nearly 50,000 to 27,461, with the current holdings valued at approximately $1.5 billion.

Despite the market decline, data released by a certain institution indicates that the inflow amount of digital asset investment products reached 441 million USD last week. Among them, Bitcoin investment products accounted for the largest share of the inflow of crypto products, reaching as high as 90%. Regionally, the inflow of funds mainly came from the United States, with other significant buying coming from several countries and regions.

The mining industry is facing severe challenges.

Recently, the decline in Bitcoin prices has made survival even more difficult for miners who have already seen a sharp decrease in profits due to the halving. According to surveys, if the price of Bitcoin falls to $54,000, only ASIC miners with efficiency greater than 23W/T will be able to profit, and only a few models of miners can barely support this.

The selling behavior of miners is also considered to be part of the reason for this price drop. To cope with cash flow issues after the halving, the selling by mining companies continues, with 30,000 Bitcoins from miners entering the market just in June.

Against this backdrop, as the inscriptions recede, mining companies naturally choose to sell Bitcoin for survival, whether for cash flow reserves or for industry migration and exit.

Fortunately, as the price of Bitcoin decreases, small and medium-sized mining farms are gradually shutting down, and the difficulty of Bitcoin mining is rapidly decreasing, which may soon mark the end of miners' surrender. Data shows that the difficulty of Bitcoin mining has been adjusted down by 5% to 79.5T, with an average hash rate of 586.72EH/s over the past week. Since May, the amount of Bitcoin sent to exchanges by miners for sale has significantly decreased, and over-the-counter trading volume has notably dropped.

Overall, the price fluctuations of Bitcoin have had a huge impact on miners' survival, but as the market adjusts, miners' selling behavior is gradually decreasing, and the industry may usher in a new balance.

Potential Positive Factors

expectation of large-scale capital injection

The restructuring plan of a certain trading platform may bring significant benefits to the market. According to the revised restructuring plan and disclosure statement submitted by the platform to the court, it is expected that the total value of assets collected and converted into cash for distribution will be between $14.5 billion and $16.3 billion, exceeding the $11 billion owed to customers and other non-government creditors.

Currently, the platform has obtained court approval, and creditors can choose to vote on the compensation plan for the cryptocurrency either in cash or in kind. Creditors must vote by August 16, and the judge will decide whether to approve the plan on October 7. Once approved, the platform will repay creditors within two months, with the expected timeframe being from the fourth quarter of 2024 to the first quarter of 2025.

Although the final compensation method has yet to be determined, some analysts believe that, given that most customers are cryptocurrency enthusiasts, this amount of up to $16 billion will enter the crypto market and become a major catalyst for price increases. Predictions suggest that Bitcoin may break $120,000, Ethereum may exceed $12,000, and other cryptocurrencies may also see significant gains.

Interest rate cut expectations heat up

The Federal Reserve's monetary policy has always been one of the important factors influencing the price of Bitcoin, and interest rate cuts usually boost the market.

Recently, the Chairman of the Federal Reserve stated that inflationary pressures in the United States have eased, but more data is needed to prove that the inflation risk has passed before deciding to cut interest rates. If the rate cut is too early, inflation may resurge; if the rate cut is too late, it could lead to a slowdown in economic growth or even trigger a recession.

Although the timing of interest rate cuts has not yet been determined, as the latest economic data from the United States shows a slowdown in economic growth, market expectations for rate cuts are rising. According to a certain interest rate observation tool, 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 new regulations are about to take effect

In December last year, the Financial Accounting Standards Board in the United States released the first edition of accounting rules for encryption digital currencies, requiring companies holding Bitcoin or Ethereum to record the changes in their coin values at fair value and reflect them in net income. The new regulations will take effect for fiscal years beginning after December 15, 2024, and will apply to both listed and non-listed companies for the 2025 fiscal year.

The change in this accounting standard means that several listed companies will be able to record the highs and lows of their encryption holdings. This will promote further compliance in the crypto market and gain liquidity injection from mainstream financial markets.

Historical Experience and Future Outlook

Looking back at the price trends after each Bitcoin halving, we can identify some patterns:

1. Second halving (July 10, 2016): Before the halving, Bitcoin surged significantly, and after the halving, there was a deep pullback, followed by a long-term upward trend.

2. The third halving (May 12, 2020): Due to special events, the market fell sharply before the halving. There was a rebound after the halving, but it experienced a long period of volatility.

Based on historical experience, Bitcoin typically experiences a pullback before and after halving. Although the market generally expects Bitcoin to rise after this halving, the actual situation still needs further observation.

The future market trend may exhibit the following situations:

1. If it breaks through the current resistance level and stabilizes above 69000 points, it may signal the beginning of an upward trend.
2. The market may be close to the previous high but fails to break through, or only briefly breaks through before falling back.
3. If it breaks through the previous high and continues to reach new highs, attention should be paid to the strength and sustainability of the breakout.

Regardless of how the market changes, investors should remain cautious, adjust their strategies based on the actual situation, and control risks.