Exclusive Market Analysis of Cryptocurrency | January 4

On the macro front, at 3 AM today, the Federal Reserve released the minutes from last December's interest rate decision meeting. The minutes indicated that participants discussed the reduced risks of rising inflation, and the committee will weigh "tightening versus easing" in the future. In the previous meeting, Powell mentioned the prospects of rate cuts, and the dot plot showed that the median expected rate at the end of 2024 dropped from 5.1% to 4.6%, implying an expectation of three rate cuts. However, the CME FedWatch Tool indicates that the market still leans towards a total rate cut of 150 basis points by the Fed next year. The specific direction of monetary policy next year will depend on inflation and economic trends. Currently, the inflation level in the U.S. seems to be under control, so it is highly likely that monetary policy will be optimistic next year. The U.S. stock market has adjusted in the past two days, and the dollar index has rebounded, which is also related to the short-term negative policy environment.

The most focal event yesterday was the release of a research report by Matrixport, which triggered panic selling in the market. I looked at this report, which mainly stated that due to political reasons, SEC Chairman Gary would not approve the Bitcoin spot ETF, and that a series of contract liquidations could drive the price down to $36,000-$38,000. There was no convincing logic in the report that made me believe the SEC would reject the spot Bitcoin ETF. Notably, this institution had stated on the 2nd, just two days ago, that the SEC would approve the Bitcoin spot ETF application and that the Bitcoin price would reach $50,000. It is hard for me to understand the logic of this institution, which is under the control of crypto mogul Wu Jihan, and such absurdity might be due to some other reasons.

Furthermore, the report mentioned that the ETF would not be approved in January but believed it would be approved in the second quarter (April to June). This is also difficult to understand. We know that most application institutions (mainstream institutions) have their ETF products reviewed by mid-March. This means that if they are all rejected, these institutions cannot immediately apply and get approved in April to June due to the time constraints of the process. Since the report did not provide a logical basis for such speculation, it is hard to understand the reason behind this prediction.

Binance will launch AI tonight at 6 PM, with a total supply of 1 billion tokens and an initial circulation of 13%, or 130 million tokens. Binance mining accounts for 7% of the total supply, or 70 million tokens. Based on the recent market capitalization of new projects launched by Binance, it is likely that AI will be priced between 1.x and 2.x after its launch.

On-chain, let's review the behavior of whales across exchanges. We can see that most whales made significant purchases around $17,000 last year. So, is there a reason for the current decline? From the behavior of whales, it may indeed make sense. With a cost basis of $17,000, they have already seen more than double the returns, so it is reasonable to consider when to sell such returns.

Huobi whale cost basis: 16819

BitMEX whale cost basis: 16944

Bybit whale cost basis: 18809

Deribit whale cost basis: 16944

OKX whale cost basis: 16746

A joke circulating these days: The SEC is likely to reject Cathie Wood's Bitcoin spot ETF application on January 10. According to insiders, the reason may be that during a dinner on the evening of January 2, BlackRock's chairman did not stand up to toast SEC Chairman Gary Gensler, and during the second round of karaoke, did not let Gary Gensler pick a girl first, which left the old man without a song to sing all night, making him quite unhappy.

In terms of market conditions, a sudden negative news led to a widespread market correction, triggering extreme panic, with a total liquidation of $920 million across the network. Most high-leverage long positions were liquidated. Coinbase is still at a premium, indicating that Americans have not been affected by this negative news. After the drop yesterday, I immediately published details about the Matrixport report and commented that the small-scale decline had already finished. The massive volume combined with significant liquidations makes this adjustment quite healthy for the short-term trend.

In terms of patterns, the divergence at the daily level does indeed have an impact on the market. Recently, there has been a huge long position in the market, with strong expectations for ETF approval. Therefore, Matrixport was merely the catalyst for this adjustment; the root cause lies within the market itself. However, since the adjustment has already occurred, there is no need to panic further. The expectation of the ETF not being approved has already been somewhat priced in, and we can just wait for the official results. Currently, the structure of Bitcoin has not deteriorated; it is still in a consolidation phase after an upward trend, and the lower boundary of the range at $40,000 has not been broken. We cannot conclude that the upward trend has ended and that the price is starting to decline on the right side; this still requires a confirmation process, so we can be a bit more patient.

In relation to ETH, during such panic sell-offs, ETH tends to perform weaker than BTC, which is normal. If the market trend does not end, ETH may become stronger due to the favorable impact of the Cancun upgrade.

Regarding altcoins, due to yesterday's panic sell-off, many altcoin sectors suffered greatly, with only L2 and a few ecosystems on ETH showing relative resilience. However, reducing leverage is also healthy; after sufficient adjustments, the market will be more likely to rise. This time, the market exchanged space for time, and there is no need to panic in the short term. It is also not advisable to cut losses at low levels unless it is for poorly performing coins. The vast majority of coins will likely see some rebound from their oversold conditions. When positioning, look for coins with good elasticity, especially those that can recover from yesterday's significant declines.

Panic index: 68