[Thinking Post] Discuss how to view the withdrawal risk of $BTC from a macro perspective and what monitoring indicators are there?


1. What factors influence the rise and fall of BTC?
Before discussing BTC prices, it is necessary to explore some prerequisites.
1) A successful investment philosophy is: the more complex, the lower the success rate; the simpler, the higher the success rate.


2) There are only three price patterns for an asset: rising, falling, and sideways; however, these three occupy different proportions across different time dimensions.


Taking BTC as an example:
l Long-term perspective (3-5 years): Its pattern only goes up, with new highs above new highs;
l Medium to long-term perspective (1 year): From 2013 to now, only 2014, 2018, and 2022 saw declines, with a four-year cycle, a long bull and a short bear.
l Medium to short-term perspective (1 month): The times of increase are: February to June 2019 (4 months); October 2020 to March 2021 (6 months); July to October 2021 (with a drop in September); January to April 2023 (4 months); September 2023 to March 2024 (7 months), September 2024 - ? (has already increased for 3 months)
l Short-term perspective (weekly): The basic rule is that generally, the weekly increase lasts no more than 3-5 weeks before a correction occurs. An exception is from October to December 2023, which saw an 8-week consecutive rise.
l The scenario of transitioning from an uptrend to a downtrend is: after consecutively hitting new highs for 3-5 weeks, if it closes down, it indicates that the top of the first phase has been reached, and a second attempt at a new high will occur, followed by consolidation and a decline.
l In the past, bull tops typically formed from sharp rises, with weekly increases exceeding $10,000.
l The speed of overall increases is matched by the abruptness of declines, characterized by high volatility and high returns.


3) The trend of an asset depends on: intrinsic value, external environment. Long bull and short bear at least indicate that BTC's intrinsic value (the network effect of consensus is spreading); medium to short-term volatility comes more from the external environment.
What are the external factors affecting BTC? In other words, under what conditions will various funds buy BTC in this market? This further depends on capital and risk appetite; ample funds and high risk appetite will drive prices up; when will they fall? When expected profit targets are met and risk appetite deteriorates, selling will occur.


4) From a risk perspective, the process of rising is a process of risk accumulation; the process of falling is a process of risk alleviation. Deterioration in risk appetite is triggered by a variable in risk accumulation leading to overall decline.

2. How to view the deterioration in risk appetite caused by risk accumulation
Most analyses will see that when long-term holders begin to sell, it is basically at the top, but the question is what makes them decide to sell, aside from meeting profit expectations. The chips are the result, and making this decision indicates that they at least believe that a phase peak has been reached, and this peak is due to risk accumulation reaching a certain level, with signs of exposure already present. Furthermore, we need to assess which risks are currently accumulating in the market or, more straightforwardly, what expectations the market has priced in and how to view changes in those expectations.
1) Optimistic consensus expectations regarding economic fundamentals


Currently, globally, the United States seems to be an exception, with the scenery here looking particularly good; everyone seems to take it for granted that the economy is doing well, but we must cautiously rule out the worst recession risks, mainly the risk of a rapid rise in unemployment. Additionally, the narrative around AI in US stocks can serve as a more forward-looking indicator.


2) Overly optimistic consensus expectations regarding Trump's policies
Assuming Trump’s nomination or revealing stricter regulations on crypto before taking office, a shift in expectations will directly trigger risk exposure.
3) Expectations of monetary easing under declining inflation


Current inflation is overall in a declining channel, but if inflation rebounds, leading to adjustments in monetary policy, it will directly reverse market easing expectations, triggering adjustments.

The market believes that year-end bond issuance and yen interest rate hikes, which lead to financial system liquidity tightening, are not sufficient to trigger a crisis, thus impacting risk markets; however, the SOFR in September is already a warning signal.

From the perspective of institutions' Sharpe Ratio, at the current BTC position, what is the extent of expected returns? Under such high volatility, if the risk-free rate of return rises, the reversal sell-off will come quickly.


Thus, under the above expectations, the market has experienced the following changes
(1) Market risk appetite expansion

Due to views on Trump’s tax cuts and other policies, risk appetite has generally expanded, but past data proves that once such tax benefits are over-traded, leverage quickly rises to a peak, accumulating bubbles and triggering a sharp downturn in risk appetite. It is necessary to observe changes in leverage in US stocks and BTC. Leading indicators include credit spreads (junk bonds); if spreads start to widen from a narrow state, BTC will be the first asset to contract in terms of capital allocation.

US stock valuations are at high levels, with risk appetite spreading to small-cap stocks, their main valuation expansion narrowing; once earnings expectations are not met, risk contraction will still be rapid and severe.


(2) Retail investor FOMO
Extreme FOMO typically cannot last long, primarily driven by: US stock AAII retail investor sentiment, CNN Fear & Greed Index, Crypto Fear & Greed Index. Additionally, there are some leading indicators such as US stock PCE (put/call ratio) and the rise of junk coins in the crypto market.

Overall, the current market has: good policy expectations + macro easing expectations + strong economic fundamentals expectations. This leads to an expansion of risk appetite, which in turn triggers retail investor FOMO. Therefore, any change in the above expectations could directly trigger a major market pullback.
Specific observation indicators:
Credit spread (junk bonds) - whether risk appetite has reversed
CPI/Unemployment rate/GDP - whether economic fundamentals continue to support
FFR/US10y Treasury bonds - impact on overall market valuation and liquidity
AAII retail investor sentiment, crypto market sentiment, US stock PCE, leverage risk, etc.