❖Perspective 1: Carving the Boat to Seek Cheapness❖
➤From a Cyclical Perspective
BTC is expected to experience a bull market similar to the first half of 2019 throughout 2023. After reaching its peak in June 2019, it fell and hit bottom in December 2019 (excluding the Black Swan event on March 12, 2020).
Since the approval of the ETF on January 10, 2024, BTC has only experienced a 14-day pullback.
In addition, altcoins experienced some increases in February-March 2023 and November-December 2023. Combined, there was a maximum of 3-4 months of increase. Therefore, when BTC initially fell from $48,000, most altcoins did not follow the decline. However, when BTC continued to decline, altcoins began to pull back.
➤From a Price Perspective
At the end of 2018, BTC was around $3,200, and its peak in 2019 was around $13,500, an increase of $10,300. At the end of December 2019, it hit a low of around $6,500, a pullback of $7,000, representing a decline of approximately 68% (=6500/10300).
In this round, the low point was around $15,500, the high point was around $48,500, and it temporarily pulled back to around $38,500, representing a pullback of approximately 30% (=(48500-38500)/(48500-15500)). It has not reached even half of the previous round.
Of course, this year cannot be the same as 2020. From an emotional perspective, BTC faith is increasing, and from a financial perspective, ETFs will bring long-term capital inflows.
Due to the impact of faith and ETFs, the bottom of BTC will not be too low, but it cannot be confirmed as the bottom yet. From a cyclical perspective, there may still be a possibility of further decline or oscillation.
❖Perspective 2: Macro❖
From a macro perspective, it is very similar to the second half of 2019. There are two similarities:
- Interest rates - both stopped raising rates, and rate cuts have not yet started.
- Balance sheet reduction - the reduction is still ongoing.
However, it is important to note that there is a significant difference. At the end of 2018, it was already clear that the balance sheet reduction would stop in the second half of 2019. In other words, the tightening cycle had a clear end time. But currently, we do not know when the balance sheet reduction can be stopped.
The Fed's interest rate decision on February 1 is unlikely to cut rates, but it may reveal some signals, such as when to stop the balance sheet reduction. In addition, the minutes of the January meeting will be released in February, and these two time points may shatter the expectations of a rate cut in March. About a month ago, the probability of a rate cut in March was 80%, but it is now 44.3%.
In addition to the expectations of the Spring Festival, the market in February may not be very optimistic.
❖Perspective 3: Halving❖
Halving is a positive factor. There is an interpretation in another article by AICoin, so there is no need to elaborate further.
In 2016, there was a wave of decline before and after the halving.
In 2020, before the crash on March 12, there was already a downward trend. There was no significant surge after the halving.
Halving means a reduction in production. We can start from the perspective of BTC producers, namely miners. After the halving, income decreases, and there is a high probability that BTC will usher in a bull market. Therefore, miners have the incentive to increase mining power and purchase more mining machines. So, the motivation for cashing out before and after the halving is likely to be used to purchase new mining power.
However, this round is slightly different. The script increases miners' income, and the willingness of miners to sell coins may be smaller than before.
❖Viewpoint❖
➤Medium Term
AICoin believes that 2024 (mainly the first three quarters) may be a period of squeezed oscillation or convergence.
In short:
The bottom will not be too low.
The top will not be too high.
The bottom will not be too low due to the influence of faith, ETFs, and the script, which should be understood without further explanation.
The top will not be too high, mainly due to the influence of the macro environment. In a high-interest and balance sheet reduction environment, market liquidity is limited.
Looking solely at the halving expectation or macro impact may be one-sided. The market in 2024 should be influenced by both the halving cycle and the rate reduction cycle.
➤Short Term
Currently, BTC is indeed not expensive, but it cannot be 100% confirmed as the bottom in terms of position and cycle.
The macro situation in February (the fading expectation of a rate cut in March), the realization of the Spring Festival, and the halving are all unfavorable factors for the market in February.
Next, attention should be paid to the Fed's meeting in March, as it will release a new dot plot, providing further predictions on the specific timing of the rate cut.
In February and March, attention should be paid to when the Fed will stop the balance sheet reduction, as stopping the reduction means the end of the tightening cycle.
➤About Black Swan Events
There may not necessarily be a black swan event.
One expectation of a black swan event is that a crisis may erupt in the early stages of a rate cut after a prolonged period of high interest rates. There is a historical record of the internet bubble in 2000 and the subprime mortgage crisis in 2008 erupting in the early stages of a rate cut after a prolonged period of high interest rates. This round of rate hikes is almost the same as in 2006, and if the dot plot shows a rate cut in September, it will have lasted for a year, just like in 2007.
However, the scale of this round of balance sheet expansion is very large. Even if the reduction continues for another 8 months, it will still be at a relatively loose level.
However, a significant decline is likely to occur in the early stages of a rate cut, not necessarily after the rate cut, and it may also be before the rate cut, due to the impact of expectations, the market may make a performance in advance.
Of course, AICoin will leave some positions for black swan events. Unexpected situations are always possible.
In addition, altcoins are not completely synchronized with the rise and fall of BTC, so building positions in batches is more rational.
➤About Bottom Fishing
AICoin believes that there may be two opportunities for bottom fishing:
There may be a decline before and after the halving, combined with the fading expectation of a rate cut in March.
There may be a decline before and after the rate cut. Historical data shows that the stock market often declines during a rate cut. (AICoin's subjective understanding of this logic is that before the rate cut, expectations are hyped to raise stock prices and then sell off with high-interest loans, and then wait to borrow again when interest rates come down.) And this expectation seems to have become a consensus among some people, so it is necessary to be cautious about a decline after the rate cut.
We should be on the way to the first opportunity now.
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