The crypto market faces multiple challenges, but is expected to迎来转机 by the end of 2024.

The crypto market in July failed to see the anticipated rebound. A combination of multiple negative factors led to a decline in Bitcoin prices, resulting in a widespread downturn across the market. Nevertheless, some positive factors still offer hope for the market, and many analysts believe that the crypto market may start to turn around in the fourth quarter of 2024.

Current Major Bearish Factors

Compensation issues trigger market volatility

The compensation issue of a certain trading platform has attracted significant attention from the market. The potential selling pressure of a large amount of encryption assets had previously triggered panic in the market on June 24, causing the price of Bitcoin to drop to around $60,000.

As the compensation officially began, Bitcoin broke below the support level of $60,000 under heavy selling pressure. During this process, Bitcoin miners showed signs of capitulation. Historical experience indicates that this usually means the price has bottomed out. The last comparable hash rate decline occurred in 2022 when the trading price of Bitcoin was $17,000.

Some analysts believe that most market participants are not aware of the seriousness of the potential decline in Bitcoin's four-month volatility range. The market may experience a more extreme correction down to the $40,000 range. Such a correction could cause significant damage to the market and may require several months of consolidation/downward trend before a reversal to an upward trend can occur.

Government sell-off intensifies pressure on the crypto market.

A certain country's government transferred over 10,000 Bitcoins it held in batches to crypto exchanges and market makers. This action caused the price of Bitcoin to briefly drop below $55,000. However, the government later reclaimed a portion of the Bitcoins, amounting to approximately $163 million.

According to data platforms, the government's sell-off plan has completed nearly half. Since the sell-off began last month, its Bitcoin holdings have decreased from nearly 50,000 to 27,461, with the current holding value at approximately $1.5 billion.

Despite the market decline, data shows that the inflow amount of digital asset investment products reached $441 million last week. Among them, Bitcoin investment products accounted for the largest share of the total inflow of crypto products, with a proportion as high as 90%. From a regional perspective, the inflow funds mainly came from the United States, amounting to $384 million.

The Bitcoin mining market is facing challenges.

Recently, the drop in Bitcoin prices has made survival even more difficult for miners, who are already struggling due to a sharp decrease in profits caused by the halving. If Bitcoin prices fall to $54,000, only ASIC miners with efficiency exceeding 23W/T will be able to profit, and only a few models of miners can barely sustain this.

The selling behavior of miners is also considered to be part of the reason for this price drop. In order 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.

Fortunately, 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, with miners' capitulation about to end. Data shows that the difficulty of Bitcoin mining has been reduced by 5% to 79.5T, with the average hash rate across the network over the past seven days at 586.72EH/s. Since May, the amount of Bitcoin sent to exchanges by miners for sale has significantly decreased, and over-the-counter trading volume has noticeably declined.

Positive Factors Worth Noticing

A certain trading platform's repayment plan is expected to drive the market to new highs.

According to a revised reorganization plan and disclosure statement submitted to the bankruptcy court in Delaware, USA, a certain trading platform expects that the total value of assets collected and converted into cash, available 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 trading platform has received court approval, and creditors can choose to vote on the compensation plan for encryption currency in cash or physical form. 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 an expected timeframe from Q4 2024 to Q1 2025.

Some analysts believe that given that most clients are cryptocurrency enthusiasts, the funding of up to $16 billion will enter the crypto market and become a major catalyst for price increases. Bitcoin is expected to break through $120,000, Ethereum will surpass $12,000, and other cryptocurrencies will rise by 10 to 50 times.

Clear expectations for interest rate cuts

The Federal Reserve's decisions on interest rate hikes and cuts are one of the important factors affecting Bitcoin prices, and rate cuts usually lead to a stronger market.

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

Although the timing for interest rate cuts has not yet been determined, market expectations for rate cuts have risen as the latest U.S. economic data shows signs of slowing economic growth. For instance, the June non-farm payroll data has been significantly revised downwards, and the unemployment rate has climbed to 4.1%, the highest level since November 2021. According to the data, as of July 9, the market expects the probability of the Federal Reserve cutting rates at the September meeting to rise to 73.6%, while the probability of holding steady is 22.9%.

encryption accounting system will soon take effect

In December last year, the Financial Accounting Standards Board in the United States released the first version of accounting rules for cryptocurrency, 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 rules will take effect for fiscal years beginning after December 15, 2024, and will apply to both publicly traded and non-publicly traded companies for the 2025 fiscal year.

For crypto assets, this change in accounting standards means that several listed companies will be able to record the highs and lows of their cryptocurrency holdings. This will drive further compliance in the crypto market and receive liquidity injection from mainstream financial markets.

Bitcoin Price Trends After Each Halving

Market trends are mainly of three types: rising, falling, and fluctuating. If the market breaks through the current resistance level and stabilizes above 69000 points, it can be regarded as the beginning of a bullish trend.

Two possible scenarios for an increase:

1. Approaching previous highs but not breaking through: The market may be nearing previous highs but has failed to break through, or it may have only slightly broken through and then retraced. In this situation, do not be misled by market illusions, and do not chase the highs.

2. Breakthrough previous highs and sustain new highs: If the market breaks through previous highs and sustains new highs for at least more than 3 days. At this time, pay attention to the strength of the breakout, and observe whether there is a strong rally or an upward consolidation within 3 days to 1 week.

At present, the possibility of continued rise is relatively low. If the second scenario occurs and the trend after the breakout is not strong enough, be cautious of the risk of a significant decline.

Historical halvings have shown that Bitcoin tends to experience a pullback both before and after the halving. The market currently generally expects Bitcoin to rise after the halving, but what will happen this time? It may require further observation.