After the rebound in February 2023 brought Bitcoin from $15,000 to $30,000, the market began to cool down. Since last year, people have been calling for attention to macro risks. Mr. Samo, who was lying flat with an empty position, felt a little painful on his face.
Looking at A16Z's Crypto Index, after the rebound in February, the index has now returned to the most bearish level of Bitcoin between 15,000 and 17,000 from September to November last year.
Looking at the supply of stablecoins, it has continued to slowly flow out in the past few months
Apart from the recent sharp drop in the NFT market, the transaction volume of on-chain DEX is also in a stage of continuous shrinkage.
Therefore, the overall situation is not optimistic, with liquidity being withdrawn, gambling funds becoming less and less, and volatility becoming increasingly greater.
In this round of bull market in 2021, the blockchain market is very dependent on the benefits brought by the overall liquidity spillover. Everyone has a deep understanding of the power of the monetary easing stimulus caused by the epidemic and the subsequent interest rate hikes and tightening.
The overall risk market is still facing long-term tightening pressure. The LEI index (leading economic index) shows that it is still facing a crisis. The inverted yield curve of U.S. Treasury bonds has developed to the deepest depth and longest inversion time in more than 40 years, indicating that we are still on the eve of a change.
In terms of base effect and inflation structure, July may be the bottom of the inflation growth rate, and there will be pressure for inflation to rise in the future. This means that the Federal Reserve still has sufficient reasons to raise interest rates, once this year and possibly once next year, and the high interest rate will be maintained for a very long time, which is the so-called Higher for longer.
Historically, risk markets such as the U.S. stock market have never collapsed when interest rate hikes ended, but have plummeted during the platform period of maintaining high interest rates. Therefore, even the interest rate hike phase has not yet ended. If the U.S. stock market collapses, it is hard to say that the cryptocurrency market will be able to remain unscathed.
In addition, the total amount of credit card debt in the U.S. is at a historical high, the credit card default rate is also climbing to the level before the epidemic, and same-store sales are shrinking, indicating that pressure on the American people is accumulating.
In short, although the interest rate hike cycle is coming to an end, it does not mean the end of the tightening cycle. In fact, this tightening cycle may last longer than everyone imagines. As the pressure accumulates, it is almost certain to trigger an exciting drama. In the meantime, it may be safer to reduce your position and wait and see what happens.