Today, Bitcoin and other large digital currencies have soared to dizzying heights. The fear of missing out (FOMO) has certainly attracted hesitant investors and outright speculators to the market, but many still don't know how cryptocurrencies work.
Research confirms that although China drives nearly 80% of the world's Bitcoin trading volume and investors control 1/7 of the world's Bitcoin reserves, many citizens excessively pursue short-term gains, and some people regard it as illegal currency and look forward to using Bitcoin To achieve "get rich overnight"; others regard it as an investment product and focus on predicting its future value-added ability.
The Guardian pointed out that the suppression of Chinese billionaires, sluggish economic growth and falling stock markets are triggering massive outflows of funds from China. The report mentioned that in the first half of 2023, China's international balance of payments gap was US$19.5 billion, which is an indicator of capital flight. The real number may be many times higher.
Immigration consultants say the Chinese are snapping up luxury apartments in Singapore and elsewhere, and thousands of wealthy Chinese families are leaving the country. Driven by this outflow of Chinese capital, Singapore surpassed Hong Kong to become the financial capital of Asia in just a few years. Of course, the reason they chose Singapore was not mainly because the Singapore Exchange was more convenient for shorting the Chinese stock index, but that Singapore has vigorously promoted the development of cryptocurrency in the past few years and has become the center of global cryptocurrency.
You must know that the biggest benefit of cryptocurrency to investors is that it can flow overseas freely without regulatory constraints. When Singapore implemented an open policy on cryptocurrency and Bitcoin could be exchanged for cash anywhere in Singapore at any time, Chinese funds began to fall in love with Bitcoin.
In order to maintain Hong Kong's financial status, the Hong Kong SAR government also implemented the free exchange of cryptocurrency last year. Now to exchange Bitcoin in Hong Kong, you only need to go to a street store to exchange between cash and cryptocurrency without facing any Review, there are 450 stores, ATMs and websites in Hong Kong offering such services. They are a significant part of over-the-counter, or over-the-counter, cryptocurrency trading, accounting for the majority of the $64 billion in Chinese digital assets flowing through Hong Kong as of June, according to Chainalysis.
At the beginning of this year, the Bitcoin ETF was welcomed by a large number of domestic mysterious funds as soon as it was launched. According to data from The Block, Asian investors have been extremely active during this round of Bitcoin’s rise. Investors in Asian countries account for approximately 70% of Bitcoin trading volume. Of the cumulative US$1.17 trillion in Bitcoin transactions in February 2024, Asian investors contributed US$791 billion, while North American investors accounted for only US$113 billion. Therefore, it is unabashedly said that this round of cryptocurrency bull market is almost driven by the transfer of assets by wealthy Chinese.
So far, Bitcoin has once again sprinted to its previous high from around $70,000. As for the future trend of Bitcoin, the market has become seriously divided. Both the long and short sides have placed heavy bets on their respective futures, and the war is in full swing.
Since Bitcoin approached the historical record in March, tens of thousands of people have liquidated their positions every day because of betting in the wrong direction. Coinglass data shows that in the 24 hours on March 6 alone, the crypto derivatives market was worth about $818 million. Cryptocurrency bets and $235 million in bearish cryptocurrency bets were liquidated, totaling more than $1 billion in daily liquidations since March, one of the highest figures in Bitcoin's history. A fluctuation of about 14% can occur in one trading day, and the market volatility of Bitcoin has reached an all-time high, and both parties involved in betting have become red-eyed.
In this game, the bulls led by market makers and miners completely monopolized the entire market. While the bears were still guessing future price changes through changes in interest rates and related markets, the bulls had already known the Fed's movements through secret information channels and even influenced its decision-making.
More importantly, because of Bitcoin’s successive rises, the large influx of long positions has forced traders and market makers to hedge their risk exposures. The usual way for cryptocurrency exchanges to hedge is to purchase underlying cryptocurrency instruments so that they will not Facing directional risks. If Bitcoin starts to rise, traders will have to hedge further, buying more of the underlying token.
If the bulls take advantage of this and continue to buy, a long squeeze will form. This self-perpetuating cycle will cause prices to rise rapidly, forcing cryptocurrency exchanges to purchase more underlying tokens in order to ensure delivery.
Although $70,000 is difficult at present, the bearish power is relatively weak and may not be an obstacle to the bulls. However, because Bitcoin bulls have accumulated a large number of highly leveraged positions from derivatives, if short sellers can successfully push the price below the key position, it will cause bulls to liquidate their positions one after another, triggering a Bitcoin avalanche, and the price will plummet. US$70,000 is an important turning point in the psychological dividing line between long and short.
Summarize
As the market begins to bet on whether Bitcoin will rise or fall after the halving event, countless investors are staying up all night on this issue. However, the cryptocurrency market is highly volatile and prices may fluctuate violently. Investors should have a clear investment plan and long-term vision, and should not blindly chase short-term gains or be driven by "FOMO".
