Friday's crypto market can be described as a 'day of horror': Bitcoin fell below the critical line of $84,000, plummeting 9.28% in a single day, and Ethereum fared worse, dropping over 10% in 24 hours and falling below $2,700. Some are shouting 'the bear market is here', saying it needs to drop another 50% to find the bottom; others say 'the adjustment is nearly over', with a state government even issuing bonds in Bitcoin against the trend. The market is half sea and half fire, and today we will clarify the most critical information and logic.
The battle of bulls and bears: after the plunge, is it time to buy the dip or escape the peak? The big shots are arguing fiercely.
The core question after the plunge: how far will this round of adjustment fall? The views of institutional leaders are directly 'opposed', and each logic is quite persuasive.
Bearish warning: Before 'dumb money' clears out, there needs to be a 50% drop.
The warning from QwQiao, co-founder of Alliance DAO, is quite sharp. He bluntly stated on Twitter: the next bear market will be worse than most people think. A large number of 'dumb money' with no knowledge of crypto has flooded into the market, following trends to buy spot and ETFs, which has never ended well. Before these people completely liquidate, the market may need to drop another 50% to hit a solid bottom, and only then can a new super bull market begin.
His views were echoed by Placeholder partner Chris Burniske: the sell-off of DAT has just begun. The craziness of previous gains will be matched by the intensity of the current declines. From the data, these concerns are not unfounded—VanEck statistics show that Bitcoin has dropped 13% in the past 30 days, resulting in a net outflow of 49,300 BTC for BTC ETPs, with market sentiment falling to its lowest point of the year. On-chain data is even more obvious: whales holding 10,000-100,000 BTC are continuously reducing their holdings, and mid-term holders of 3-5 years are also selling, with only the 'die-hard fans' holding for more than 5 years remaining unchanged.
André Dragosch, head of research for Bitwise Europe, even provided a 'crash price': Bitcoin's 'maximum pain point' is at $84,000 (IBIT's holding cost) and $73,000 (MicroStrategy's cost). Once it falls below either, it will trigger large-scale liquidations, possibly leading to a full reset of this cycle.
Bullish counterattack: Deleveraging is almost over, may surge to 250,000 by year-end.
Tom Lee, chairman of BitMine, boosted market confidence on CNBC: the current trend is exactly like the crash on October 10, which was caused by a stablecoin pricing error leading to the largest liquidation in history, where 2 million accounts were washed out, and liquidity instantly dried up. However, this type of deleveraging cycle usually lasts for 8 weeks, and it has now entered the 6th week, nearing its end.
More radical is analyst Arthur, who believes the short-term decline is due to 'liquidity exhaustion'—since July, $1 trillion of dollar liquidity has evaporated, ETF arbitrage funds have withdrawn, and the 'pseudo-buying' in DAT is gone. The market needs to first decline to match real liquidity. However, he predicts that once US stocks drop by 10%-20% and US bond yields soar, the Federal Reserve and Treasury will be forced to ease liquidity, at which point Bitcoin may surge in the opposite direction, potentially reaching $200,000-$250,000 by year-end.
Ethereum's dual crisis: Institutional invasion + Quantum attack.
Compared to Bitcoin's 'pure decline,' the risks facing Ethereum are more complex, as Ethereum co-founder Vitalik directly pointed out two major 'fatal threats' at the Devconnect conference, neither of which can be solved in the short term.
1. Institutional holdings approaching 10%, will decentralization be gone?
Vitalik warns: If giants like BlackRock continue to accumulate ETH, Ethereum will be 'cut off at the root.' On one hand, decentralized developers will be squeezed, potentially losing the core community; on the other hand, institutions will force a change in the technical direction, such as demanding a block time of 150 milliseconds, which ordinary users will not be able to run nodes, leading to geographical and network centralization of Ethereum, completely contradicting the original intention of decentralization.
The current situation is already severe: 9 Wall Street ETF issuers hold more than $18 billion in ETH, with corporate treasury holdings being similar, and the institutional share will soon breach 10%. More critically, BlackRock has registered a 'Staked Ethereum ETF' in Delaware, although it is just a name registration, it is a clear signal of advancing into the staking business—it's worth noting that the first batch of ETH spot ETFs in 2024 was required by the SEC to remove staking features.
2. Will it be broken by quantum computing before 2028?
In addition to institutional risks, technical security has also raised red flags. Vitalik stated that the elliptical curve cryptography currently used by Ethereum may be cracked by quantum computing before the 2028 US elections, leaving Ethereum only 4 years to complete its quantum-resistant upgrade.
Concerns from bigwigs have already transmitted to the market. Ethereum treasury company FG Nexus sold 10,922 ETH last month to raise funds for stock buybacks, now holding only 40,005 ETH, clearly preparing for risks in advance.
Market chain reaction: 1 billion DAT shelved, Strategy facing index removal.
The decline in the crypto market has triggered a chain reaction, with two landmark events worth paying close attention to.
1. The 1 billion ETH DAT led by Li Lin, Shen Bo, and others has cooled off.
The 1 billion dollar Ethereum DAT plan led by Li Lin, Shen Bo, Xiao Feng, Cai Wensheng, and others has been officially shelved, and the raised funds have been returned to investors. This is the largest scale DAT led by Asian investors, and the reason for the suspension is straightforward—after the 1011 incident, the market turned bearish, and recently many DAT companies' stock prices have plummeted, leaving no one daring to push forward. As for whether it will be restarted, the person in charge only said, 'It depends on the market situation, prioritize protecting investors' interests.'
2. Michael Saylor's Strategy may be kicked out of the index.
Michael Saylor, a 'die-hard fan' of Bitcoin, is also in trouble as his Strategy company faces the risk of being removed from mainstream indices like MSCI USA and Nasdaq 100. JPMorgan estimates that if MSCI does this, it will trigger a $2.8 billion outflow of passive funds. If other indices follow suit, the consequences will be more severe—currently, passive funds linked to Strategy have a $9 billion exposure.
MSCI's reason is: Strategy's digital asset holding ratio exceeds 50%, resembling an investment fund rather than a legitimate operating company, and should not be included in the index. The final decision will be made before January 15, during which Strategy's stock price and Bitcoin may be affected.
Economics and Policy: Rate cut expectations have cooled, but crypto compliance has seen breakthroughs.
Volatility in the crypto market is closely related to macroeconomic conditions and policy directions. Recently, two opposing signals have determined the long-term direction.
1. No rate cuts from the Federal Reserve in December.
The latest US economic data is out: For the week ending November 15, initial jobless claims were 220,000, 10,000 less than expected; September non-farm payrolls increased by 119,000, the largest increase since April. However, the unemployment rate also rose to 4.4%, the highest since October 2021. Morgan Stanley has directly changed its stance: no longer expecting a rate cut in December, with a cut in January, April, and June, ultimately leading to a rate of 3%-3.25%. For crypto, the expectation of liquidity easing has been delayed again, which is a negative in the short term.
2. Major breakthroughs in compliance: Banks can hold coins, state governments can issue bonds with BTC.
Although there are short-term negatives, the compliance of the crypto industry is accelerating, and two events are significant.
Firstly, the Office of the Comptroller of the Currency (OCC) issued new regulations, clearly stating that national banks can hold crypto assets to pay for gas fees and can hold necessary coins to test crypto platforms, as long as they are safe and compliant. This is equivalent to giving banks the green light to participate in crypto business, marking a significant advancement in the fusion of traditional finance and crypto.
Secondly, New Hampshire made big news by approving the first $100 million Bitcoin-backed municipal bond in the US. This bond is collateralized with BTC held by BitGo, with an initial collateral rate of 160%. If BTC drops too much and triggers the 130% liquidation line, it will liquidate to protect investors. Moreover, the bond's yield will go into the 'Bitcoin Economic Development Fund' to support local entrepreneurship and innovation. The global debt market size is $140 trillion, and this attempt could open up a huge new market for crypto.
Additionally, the White House is reviewing the rules for joining the global crypto tax framework CARF. Once joined, countries will automatically share crypto asset information to combat tax evasion, implemented globally by 2027. While this will strengthen regulation, it will also make crypto more 'acceptable,' which is a good thing in the long run.
Summary: After a crash, what should we watch for? Three key signals.
The current market has both short-term panic and long-term hope. Ordinary investors don't need to get caught up in 'is this a bear market'; focus on three signals.
1. Key defenses for Bitcoin: $84,000 (IBIT cost) and $73,000 (MicroStrategy cost) are two death lines. Whether breaking below will trigger a larger sell-off is the core of assessing the depth of adjustments.
2. Deleveraging cycle progress: Tom Lee's 8-week deleveraging cycle is now in the 6th week. If no large-scale liquidations occur in the next two weeks, it may be truly close to a bottom.
3. Compliance landing situation: Whether BlackRock's staking ETH ETF can pass the SEC, whether the bond issuance in New Hampshire goes smoothly—these compliance breakthroughs will bring long-term incremental funds to the market, which is more important than short-term fluctuations.
Finally, a reminder: the current market sentiment is extremely polarized. Don’t follow the crowd to chase highs and lows. If you are a long-term investor, pay attention to the structural opportunities brought by compliance; short-term speculators must set stop-losses to avoid the 'black swan' of liquidity exhaustion.
Disclaimer: The content of this article is for reference only and does not constitute any investment advice. Investors should rationally view cryptocurrency investments based on their own risk tolerance and investment goals, and not blindly follow the crowd.
