On the morning of March 9, 2020, bitcoin fell without resistance. It continued to plummet from the high of $9150 two days ago and fell below the $7700 mark. Although it rebounded slightly, up to now, the bitcoin quotation of the mainstream trading platform is still below $8000. With the sharp decline of bitcoin, when to copy the bottom has become a hot topic for more and more people.
However, most people who want to copy the bottom have not even figured out the first question: why copy the bottom?
The essence of bottom reading is that investors believe that the downward trend will reverse, or the price is already at the bottom of the historical cycle. However, for bitcoin, this is not the case.
Let’s first review the rise of bitcoin. In January 2020, the whole cryptocurrency market quietly bottomed out in despair. With bitcoin continuously receiving three long shadow lines below $6800, the long funds broke through the box shock of $7800 under the pretext of Iran incident, and the cryptocurrency rich in the speculation expectation of “halving (production)” was continuously pulled up by the funds.
The characteristics of the whole round of market are summarized in the following 16 words: upside down increase, stock leverage, small pullback and high sentiment.
Upside down growth means that in the spring market of 2020, the growth of junk currency and mainstream currency is significantly higher than that of bitcoin, and bitcoin does not have the general “blood sucking effect” in 2019;
Stock leverage means that there is no effective incremental capital entering the market in this round, and all the capital entering the market is a wave of flowing hot money without faith. The sharp rise of stock capital to leverage causes price illusion. When the dollar security spot loan usdt is sold out, the price is the highest point. The borrowing of usdt means that all potential bulls have got on the bus. Once the off-site capital relay is not enough, they can only kill more;
The slight pullback means that there is not much turnaround in the main rising wave of the mainstream currency, and the sense of trend trading is extremely smooth in the first half of February;
The upsurge of sentiment refers to the astonishing usdt lending market. The premium of quarterly contracts has intensified as the delivery deadline approaches, trying to put on a short squeeze, and the long capital rate of perpetual contracts once exceeded 150% annualized
Therefore, the departure of this round of funds at a high level is extremely firm: in a market with insufficient incremental funds and stock leverage, the part of the capital rate arbitrage strategy paid by bitcoin will be completely sold by arbitragers in the form of bitcoin. Such a “blood drawing” capital logic doomed the decline of bitcoin.
In short: the script may have been taken wrong at the beginning.
In this context, the tenacious bitcoin still received short-term support around $8400 and broke quickly after failing to break through the 20 day moving average. Behind this, there are not only the direct reasons for the demand for capital itself, but also the involvement caused by the excessive disturbance of the international financial market and the sharp decline of crude oil and other commodities.
Here, we try to discuss an old topic: is there any correlation between bitcoin and traditional financial markets.
From the perspective of statistical analysis, there is not much correlation between BTC and macro assets, which is supported by the mathematical method of correlation test.
However, from the actual disk, especially when bitcoin is more and more like a commodity and cryptocurrency is more and more like a trading game, bitcoin is often the embodiment of global liquidity preference and market sentiment.
For example, at the end of the 18th century, the consensus in that wave circle was nothing more than a power battle, causing panic on the floor and smashing the long-term chip area near $6000. But in fact, this may not be the truth. At that time, the whole world’s commodities were falling sharply, and Brent crude oil reached a low of 30, comparable to bitcoin.
The memory of this wave of decline is the same. First review the decline period from US $9500 to US $8400: when all assets around the world are falling, the VIX Index is approaching the 08 financial crisis, but in the short term, bitcoin is completely consistent with everyone at the time when all kinds of assets stabilize. On the night of falling below 8500, it happened that Brent crude oil ended its four hour downward trend. Dow Jones and Nasdaq also recorded a historic rebound, and the bull sentiment of the whole market recovered.
Looking back on the decline of US $9200 to US $7700: the crude oil market plummeted, the global finance entered a new panic, and bitcoin also broke the multi-channel support barrier in a row. In this case, it is difficult to completely look at the relationship between bitcoin and large categories of assets from a mathematical point of view, especially when you understand that bitcoin is not part of the energy industry, and when you understand that bitcoin is not a safe haven asset but a risky asset.
Here, the author wants to put forward a hypothesis: the current bitcoin is mathematically irrelevant to the macro category of assets, and the short-term fluctuation is determined by the reflexivity of market participants. However, once the global negative disturbance occurs and the peripheral market falls as a whole, bitcoin will show a strong correlation with other categories of assets.
Having said so much, we still need to understand one thing: what is the logic to support the rise?
Most people blurt out, “halve!”. But they were wrong.
Bitcoin has a large amount of trading and speculative demand, a small amount of stored value demand and a small amount of use demand. Therefore, bitcoin will halve the supply speed under the condition that the overall demand level remains unchanged for a long time, which will have a positive impact on the price. Note that there is a precondition, “the overall demand level remains unchanged”. Obviously, from the perspective of 10-30 years, this condition cannot be established all the time. You can’t expect everyone in the world to buy bitcoin, and they should buy more, use more and save more each time. There must be an upper limit of demographic dividend.
It is true that retail investors who can buy BTC in this life will enter the market in 2018. Compliance and non-compliance will only affect the allocation of institutions. There are so many in the world with this level of awareness and investment purchasing power for the time being. So since bitcoin is just a chip game of cognitive dividend, it may still have space, but the sharp rate must be more and more uneconomical.
At this point, we can finally answer the first question: the reason for bottom reading is that investors mistook the bear market for the bull market.
The second question comes one after another. What is bitcoin?
The essence of bitcoin is a trading asset, with almost no hedging function, and the function of store of value is also very small. Bitcoin is also a confidence game. If it is the physical supply and demand that ultimately supports commodities, what bitcoin has is people’s consensus. If the commodities and stock markets continue to rest and the crisis strikes, bitcoin will only fall first. It is impossible for international hot money to sell stocks, crude oil and gold to buy bitcoin in turn.
It should be emphasized that the sharp decline at the end of 2018 was only a superficial battle of the industry. Its essence was that global assets were falling at that time, especially the commodity market represented by crude oil, which had falsified the attribute of bitcoin as a safe haven asset at that time. People will only accelerate the abandonment of this speculative and highly volatile asset.
The script of 2020 is the same, but this time, the danger is even greater. First, the decline of crude oil and stock market is no less than that of that year. Second, in the market, what is more important than expectation is the gap between expectation and reality. When bitcoin halving is defaulted to be synonymous with rising, when the investment institutions in the secondary market only explain how to operate next year’s rise without analyzing how to hedge in case of decline, and when the mining industry believes that halving must rise and must expand the scale, The wonderful story may continue, but what is happening in the global market is too big. Once it is falsified by macro disturbance, the self correction of the market will intensify.
What is expectation? Bitcoin is expected to rise this year, and it is also expected to break through the highest point of $20000 next year. What is reality? The global financial turmoil is a reality. It is a reality for some miners to cash in the “halved” profit in advance, and it is also a reality to speculate in advance in 2019.
This is the biggest hidden danger. No one in the market is bearish and halved, as if the probability of “halving” is 0. Bitcoin and encryption leaders exhausted all fundamental, technical and data analysis methods, and finally only discussed the rise of bitcoin from 2020 to 2021, as if bitcoin could never enter the monthly level decline.
Here is a case of commodity speculation – Apple. The reason why the price of apple in 2018 is crazy is that it was originally a bumper harvest year. As a result, we encountered extreme weather and reduced production in a large area in the main production area. Bitcoin is the same now. Under the overly consistent bullish expectation, it’s easy to say if anything happens. Once something happens, it must be a big event.
If you don’t believe it, you can calm down in the market and observe it carefully.
In other financial markets, we hear the most saying that this year is the worst year. In the bitcoin market, we hear the most saying that next year is the best year. This also fully confirms that the essence of the game is the transmission of confidence.
An obvious common sense is that in the world, you will never find an asset that only rises but not falls, and you will never find an asset that eventually does not return to the inflation curve. If you find it, the time cycle must not be long enough.
This is not to say that bitcoin is bound to fall, but to point out the importance of rational thinking and rational investment. After all, no one is responsible for your net account value except yourself.
The third question is, will bitcoin die?
Latter Lammas. Bitcoin will never die, but it will not be as cheap as it was in the early days. Its end is a non-stop trading asset of globalization. Watching bitcoin 20 years later is the same thing as watching Texas poker now.
The ultimate reason bitcoin won’t die is that from the bottom of human nature, people all over the world need something to meet their desire to get something for nothing and get rich by speculation, which is also the most indestructible investment logic of bitcoin.
However, it should be pointed out that not dying does not mean not falling. After all, bitcoin did not die at the end of 2018.
Responsible editor; zl