May changes, will Bitcoin welcome the fish tail market?

BTC has experienced significant fluctuations recently, how will it develop in the future? This is one of the important issues that the market is currently paying attention to. This article explores the May market trend of Bitcoin from the perspectives of halving its cycle, macroeconomic analysis, on chain data, and geopolitical situation

BTC has experienced significant fluctuations recently, how will it develop in the future? This is one of the important issues that the market is currently paying attention to. This article explores the May market trend of Bitcoin from the perspectives of halving its cycle, macroeconomic analysis, on chain data, and geopolitical situation. The core viewpoints of this article are as follows:

From the perspective of the Bitcoin cycle, the current Bitcoin price may reach its first stage high after the deep bear by the end of May.

2. Under the expectation of stopping interest rate hikes, the weakening of the US dollar may stimulate some people to start searching for alternative assets, which will further stimulate the rise of Bitcoin and others; However, with the overall economic downturn, Bitcoin, as a new global asset, may also undergo a deep correction, and in the future, under the background of interest rate cuts, Bitcoin and other assets may perform better than traditional assets.

3. Against the backdrop of the Federal Reserve's interest rate hike and the game of major powers, the safe haven nature of Bitcoin is increasing; From the research on the correlation between BTC and gold, it can be seen that as people's demand for safe haven in Bitcoin increases, the correlation between Bitcoin and gold is also increasing.

4. From the data on the chain, it can be seen that new market demand is still entering the Bitcoin network, and the demand for textual inscriptions has increased significantly in recent days. This means that the NFT ecology and DeFi on Ethereum are still moving to the Bitcoin network, which is the main driving force for the rise of the intrinsic value of Bitcoin. It is precisely under this impetus that the price of Bitcoin has obtained substantial support.

From a technical analysis perspective, currently MA65 (around $26800) is a very important support, and if it falls below, Bitcoin is likely to enter a deep correction.

When will the peak of BTC reach when the cycle is king

On April 25th, the British Foreign Secretary cited the famous line from "The Romance of the Three Kingdoms": "The world is in a state of great power, and if divided and united for a long time, it will be divided." Throughout the world pattern, this may be the current historical cycle that the world is experiencing; In the crypto world, Bitcoin is currently performing along its halving cycle. We previously discussed the bottom time of Bitcoin in the article "Bitcoin 2022 Review and Trend Outlook", combining on chain data. At present, Bitcoin may be facing another critical milestone in its cycle.

From the perspective of the Bitcoin cycle, the current Bitcoin price may reach its first stage high after the deep bear by the end of May. Crypto Big VCryptoChan (@ 0xCryptoChan) tweeted on April 25th that the black line at the top of the graph represents the # BTC price, while the orange line below represents the long-term holder's SOPR indicator (SOPR refers to the ratio of the average selling price of BTC sold by the holder to the average buying price of BTC sold over a period of time). In history, after successfully breaking through 1.0 on the Orange Line, there was a difference of 37 days (12 years), 41 days (15 years), and 39 days (19 years) from the first phase peak of the deep bear coin price. It has been 7 days since the Orange Line successfully broke through 1.0.

When will the Federal Reserve stop raising interest rates and how will it affect BTC

In an earlier article, we delved into the deep economic design behind Bitcoin's four-year halving, which aligns with the "inventory cycle", also known as the short cycle; Macroeconomics, under the control of short cycles, may provide a nodal signal externally for the Bitcoin market, which also points towards the end of May.

Several Federal Reserve spokespersons this week supported the view that the Federal Reserve will raise interest rates by another 25 basis points at next week's interest rate meeting. Cleveland Federal Reserve Bank President Mester hinted in his speech on Thursday that he supports further interest rate hikes to quell inflation, while also expressing the need to pay attention to recent banking pressures that may curb credit and suppress the economy. Meister said, "I expect monetary policy to further enter restricted areas this year, with the federal funds rate rising above 5% and the actual federal funds rate remaining in the positive zone for a period of time." New York Fed President Williams said on Wednesday that the pressure on the US banking industry may lead to a credit squeeze, inflation remains too high, and the central bank still needs to maintain tight monetary policy. According to the Federal Reserve observation tool of Chishang Exchange, the market expects a possibility of a 25 basis point interest rate hike in May to be 82.6%.

However, unlike the market consensus that the Federal Reserve will raise interest rates for the last time in May, Nomura Securities believes that the possibility of the Federal Reserve raising interest rates in June is increasing. The institution pointed out that recent surveys have shown a rebound in short-term inflation expectations, which puts upward pressure on wage growth and poses a risk to "super core inflation". In this week's latest report, Nomura predicts that the Federal Reserve may raise interest rates twice, including in May. Nomura's specific forecast is that the Federal Reserve will raise interest rates by 25 basis points in May, and if wage inflation continues to rise, it will raise interest rates again in June.

Overall, there is a high probability that the Federal Reserve will raise interest rates by 25 basis points in May, with a maximum of one more rate hike in June before stopping; Under the expectation of stopping interest rate hikes, the weakening of the US dollar may stimulate some people to start searching for alternative assets, which will further stimulate the rise of Bitcoin and others; But with the overall economic downturn, Bitcoin, as a global asset, may also undergo a deep correction, and in the context of later interest rate cuts, Bitcoin and other assets may perform better than traditional assets. Below are some senior analysts' predictions on the potential impact of the Federal Reserve's interest rate cut on the crypto market.

On April 13th, Mike Novogratz, founder of Galaxy Digital Holdings, stated in an interview that he expected gold, euro, Bitcoin, and Ethereum to outperform competitive investments as the Federal Reserve began to slow down interest rate hikes after recent bank failures led to potential credit tightening. In addition, Novogratz stated that the clearest trading option is to continue to be long on gold, euros, Bitcoin, and Ethereum, which should perform well if the Federal Reserve stops raising interest rates and then lowers them. If interest rates fall again, Bitcoin will be in its "best position". If the Federal Reserve continues to cut interest rates, he expects Bitcoin to reach $40000.

Billionaire legend investor Stanley Druckenmiller recently revealed in an interview (April 24, 2023) that he has short the US dollar and expects the Federal Reserve to soon have to cut interest rates to cope with the economic downturn. This move may be very advantageous compared to cryptocurrencies such as Bitcoin, Ethereum, and XRP, as a weaker US dollar typically leads to increased interest in alternative assets.

The world is changing, and BTC is transforming into digital gold?

From a macro perspective, the current trend of Bitcoin's market and its relationship with the Federal Reserve are certainly highly valued, but the impact of the geopolitical situation cannot be ignored. Against the backdrop of the Federal Reserve's interest rate hike and the game of major powers, the probability of domestic currency collapse is gradually increasing in some small countries and regions due to various factors such as economy and politics. In order to maintain wealth without shrinking, Bitcoin is becoming a safe haven asset, and this demand is constantly increasing. Even in the United States, with the recent bankruptcy of a series of banks such as Silicon Valley Bank, many high net worth individuals have suffered heavy losses and are turning to Bitcoin.

On March 17th, according to Bloomberg, multiple investors planned to raise $100 million to launch the Bitcoin Opportunity Fund. One of the partners of the fund, Cory Klippstein, CEO of SwanBitcoin, an automated Bitcoin savings plan provider, said, "The recent banking crisis has highlighted the demand for Bitcoin. Everyone needs some money they own and control

From transaction data, it can be seen that during the period of Bank of America's bankruptcy, the market's demand for Bitcoin transactions significantly increased. According to Kaiko data, as of March 15th, as Bitcoin prices briefly exceeded 26000 USDT yesterday, the daily trading volume of Bitcoin on the Central Exchange (CEX) exceeded $20 billion (USDT and USDC trading pairs), reaching a new four month high since the FTX crash.

From the research on the correlation between BTC and gold, it can be seen that as people's demand for safe haven in Bitcoin increases, the correlation between Bitcoin and gold is also increasing.Bankless stated in a research report that since the beginning of the crisis, the correlation between BTC and Nasdaq has changed, while the correlation between BTC and gold has strengthened. This seems to indicate that Bitcoin is transitioning from a technology game to a true digital gold. This is a significant change in the perspective and trading methods of Bitcoin. Bitcoin can not only prevent institutional failures, but also serve as a hedging tool for its holders to prevent currency depreciation caused by a significant increase in the money supply, as we have seen since the creation of the Bank's Regular Funding Program (BTFP). Investors gained profits from holding BTC during this crisis, which increases the likelihood of them taking similar actions in the next crisis.

Network value supports BTC price increase

Although we have discussed many cyclical and macro impacts in the previous section, returning to the essence, this article believes that the real internal factor that can drive the continuous rise of Bitcoin prices is the increase in network value, which is also the essence of on chain data that we need to explore. We have previously published an article "Bitcoin's" New Culture "Movement Promotes Web3's Prosperity, and Promotes the Three New Narratives of the Bull Market". At present, the migration of NFT ecology from Ethereum to Bitcoin's network is the main driving force for the rise of Bitcoin's intrinsic value, and it is precisely under this impetus that the price of Bitcoin has obtained substantial support.

The new market demand is still entering the Bitcoin network, and the demand for text inscriptions has increased significantly in recent days.Glassnode (@ Glassnode) earlier tweeted that one way to measure market demand growth is the value of the fees investors are willing to pay for processing transactions. At present, the 90 day SMA cost exceeds its annual average, indicating that new demand is entering the market.

Glassnode tweeted on April 26th that after a brief decline in the utilization rate of inscriptions, the daily transaction count of Bitcoin inscriptions has sharply rebounded, recording the ATH of 193K inscriptions cast on a single day. This leads to ATH in the daily transaction count share, with 40% of the transactions related to the inscription file. However, despite the increasing presence in inscriptions trading, the proportion of total block sizes related to inscriptions has been decreasing. This is due to the increasing popularity of text based inscriptions, which have a significantly smaller data footprint than their image counterparts.

How will the aftermarket of BTC develop

Overall, there are still many factors that affect the future trend of Bitcoin, and the end of May will be a very important time point. In addition, investors should also closely monitor the data on the Bitcoin chain, which is an important indicator for observing market demand. In addition, as a new type of asset with sufficient market gaming, Bitcoin has strong guiding significance in technical analysis, and many influencing factors are also included. Currently, MA65 (around $26800) is a very important support. If it falls below, Bitcoin is likely to enter a deep correction.