The halving countdown is less than 24 hours away, and the market seems to be about to experience a wave of "asset price halving".

By Frank, Foresight News

"Once the cannon fires, gold will be worth ten thousand taels"?

This morning around 9:00, with the sudden news of "a strong explosion near the Iranian capital Tehran" and "explosions reported in Iran, Syria, and Iraq" dominating the headlines, the back-and-forth between Israel and Iran has once again intensified the situation in the Middle East, causing the price of gold to quickly break through $2400, marking a five-week consecutive surge.

At the same time, Bitcoin, which was previously seen as "digital gold", has taken a different path, continuously falling below the integer thresholds of 63000 USDT, 62000 USDT, and 61000 USDT, and even briefly falling below 60000 USDT, reaching a recent low of 59587 USDT (OKX spot data, the same below); Ethereum has also continuously fallen below 3000 USDT, 2900 USDT, and reached a low of 2864 USDT.

According to Coinglass data, over the past 4 hours, the total liquidation across the network has exceeded $100 million, with long positions liquidated totaling $94.57 million, and the altcoin market is in a state of lamentation, with numerous assets being halved in value over the past half month.

What's quite dramatic is that as of the time of writing, OKLink data shows that there is less than 22 hours left until Bitcoin's fourth halving, but the market has poured cold water on everyone with a "premature halving" of assets, making market expectations even more pessimistic.

Whether this round of decline is a trend reversal or a mid-term correction has become the key for everyone participating in the future market trend.

Reasons for the plunge

Briefly summarizing the possible reasons for the significant decline in this round, it should mainly be divided into two dimensions: external factors such as geopolitical turmoil, collective hawkish turn by the Federal Reserve, and internal factors such as ETF fund outflows.

Impact of Middle East conflict on global financial markets

First and foremost is the impact of the Middle East geopolitical conflict on the global financial markets. First, it is important to note that since institutional investors entered the market in force last year, especially after the spot ETH appeared earlier this year, Bitcoin's "safe-haven asset" status has actually become a kind of mystery, fundamentally it is more of a "risk asset" - its connection with the global macro environment and bull-bear cycles is more closely related (recommended reading: "When the Cannon Fires, Gold Will Be Worth Ten Thousand Taels? A Cryptocurrency Investment Guide Under Geopolitical Turmoil").

The ongoing conflict between Iran and Israel to some extent exacerbates the geopolitical risks in the Middle East, which could potentially drag down global oil supply - just after the latest conflict news this morning, the price of WTI crude oil futures in the United States rose by more than 2.5% intraday, briefly surpassing $85 per barrel, and Brent crude oil futures also rose by more than $89 per barrel.

If the conflict escalates and even involves the nuclear facilities of both sides, it could prompt a sustained rise in oil prices, which would undoubtedly worsen the U.S. anti-inflation process, thereby increasing the likelihood of the Federal Reserve continuing to raise interest rates. Therefore, Bitcoin, as a "risk asset", seems to have fallen due to the strengthening of expectations for interest rate hikes.

At the same time, this has also cast a shadow over the recent rumors in the U.S. stock market - affected by this morning's news, the futures of the three major U.S. stock indexes have expanded their declines, with Nasdaq 100 index futures falling by more than 2%, S&P 500 index futures falling by 1.5%, and Dow Jones index futures falling by 1.32%.

Federal Reserve's overall hawkish turn

In addition, over the past two months, the market's previous expectations for a mid-year shift by the Federal Reserve to rate cuts have been significantly shaken, mainly because more and more senior officials of the Federal Reserve have begun to mention "rate hikes":

First, the "third in command of the Federal Reserve", New York Fed President Williams, warned that if the data shows that the Federal Reserve needs to raise rates to achieve its goals, then the Federal Reserve will raise rates; Atlanta Fed President Bostic also said that if U.S. inflation rises, he is open to raising rates.

More importantly, in Powell's speech this week, he also stated that the lack of further progress in inflation makes it appropriate for high interest rates to continue to play a role for a longer period of time, and Nick Timiraos, a Wall Street Journal reporter who has always been seen as the "new Federal Reserve communication agency", commented on this, saying that the Federal Reserve's outlook has undergone a significant change, which seems to have shattered their hopes of "preemptive rate cuts".

It's worth noting that at the end of last year and the beginning of this year, the market's expected pace of rate cuts by the Federal Reserve for 2024 was still 5-7 times, and the first rate cut was expected to take place in March… This has also prompted U.S. bond yields to soar again, with the 10-year yield breaking through the 4.75% mark, and Wall Street investment banks even warning of a short-term return to the "era of 5%".

At the same time, a series of financial-related data has been released in the U.S. since April, including retail sales data, as well as initial jobless claims, non-farm employment data, etc., all showing strong performance. Regardless of the credibility, at least from a data perspective, it once again provides room for rate hikes.

In this context, it is only natural for some risk capital to adjust its positions.

ETF funds have been net outflows for 5 consecutive days

In addition, there is a signal worth paying attention to - according to SoSoValue data, Bitcoin spot ETF saw a total net outflow of $23.15 million on April 18, marking 5 consecutive days of net outflows.

As of the time of writing, the net asset value of Bitcoin spot ETF is $52.41 billion, with the ETF net asset ratio (the proportion of market value to total market value of Bitcoin) reaching 2.82%, and historical cumulative net inflows reaching $12.24 billion.

Of particular note is that Ethereum has already fallen to near the 120-day moving average, and the BTC/ETH weekly chart has seen three consecutive bearish candles, making the pattern extremely unattractive.

It's important to note that the 120-day moving average has always been seen as one of the most important bull-bear dividing lines, so whether Ethereum can hold this trend line and rebound strongly, and the subsequent performance of Bitcoin, becomes particularly crucial.

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