The Long and Winding Road to the "New High Consolidation Zone": BTC Navigates the Tightrope Between Capital Flows and Macroeconomics

The Long and Winding Road to the "New High Consolidation Zone": BTC Navigates the Tightrope Between Capital Flows and MacroeconomicsFrom mid-March to the end of August, spanning over five months, the price of BTC oscillated repeatedly within the "new high consolidation zone," generating volatile market sentiment. During this period, global markets experienced volatile inflation and downward trends, ambiguous and clear expectations for US interest rate cuts, uncertain speculation about whether the economy would achieve a soft or hard landing, and significant market fluctuations triggered by different investors adjusting their positions as trends shifted

The Long and Winding Road to the "New High Consolidation Zone": BTC Navigates the Tightrope Between Capital Flows and Macroeconomics

From mid-March to the end of August, spanning over five months, the price of BTC oscillated repeatedly within the "new high consolidation zone," generating volatile market sentiment. During this period, global markets experienced volatile inflation and downward trends, ambiguous and clear expectations for US interest rate cuts, uncertain speculation about whether the economy would achieve a soft or hard landing, and significant market fluctuations triggered by different investors adjusting their positions as trends shifted. In this context, a portion of BTC investors in the crypto market engaged in their first significant selloffs, locking in profits and depleting liquidity. This was accompanied by speculative shorting, panic selling, and shifts in positions between Altcoins and BTC driven by changes in market sentiment and risk appetite. Ultimately, the crypto market entered a period of stagnation, characterized by a significant reduction in spot liquidity, the elimination of leverage, a lackluster rebound, disheartened investors, and a pervading sense of pessimism.

2.91 Million BTC Poured into the "New High Consolidation Zone": Chip Accumulation and Repricing

Over the past eight months, the market has experienced continuous fluctuations. When Bitcoin reached its all-time high on March 13, the BTC distribution structure indicated an accumulation of 3.086 million chips in the "new high consolidation zone" (USD 53,000-74,000). By the closing price on August 31, the chip distribution in this range had reached 6.002 million, implying that at least 2.916 million BTC were placed in this zone over the past five months.

Although the price failed to break through to higher levels, the market capitalization continued to grow, suggesting that substantial cheap chips were repriced during this period. Repricing BTC upwards can, under certain conditions, serve as both a support and a pressure point. A sufficiently large volume of chips was exchanged, and enough capital was deployed in anticipation of a bullish future, but the nature of these funds remains unknown. Whether they will provide support or pressure for the market in the future remains to be seen.

A Battle Between Long-Term and Short-Term Players: Declining Liquidity and Capital Inflows

BTC initiated its rally in mid-October of last year. Large-scale divestment by long-term holders began in December, reaching a peak in February and March, driving the market to a new high before entering a correction phase, gradually outlining the "new high consolidation zone." Starting in May, long-term holder divestment significantly decreased. This group resumed accumulation, with a notable acceleration in the past two months (July and August). From the low point, this group increased their holdings by 630,000 BTC by August 31. The selling side primarily consisted of short-term holders and miners.

Most long-term BTC holders entered the market after the ETF approval, categorizing them as "single-cycle long-term holders." This implies that a majority of their BTC will be transformed into long-term holdings. The significant increase of 470,000 long-term holdings in August confirms this. In the foreseeable months, long-term holdings will continue to rise rapidly.

The cooling of the BTC holding structure reflects a shift from short-term to long-term holders within the "new high adjustment period" of BTC. This transformation will significantly reduce market liquidity. Declining liquidity, in the face of limited capital, typically drives BTC prices further downwards, while ample capital tends to push prices upwards. Therefore, it can be concluded that after five months of fluctuations, the market is fully prepared, and the price trend will be primarily determined by the direction of capital flows (rather than internal chip conversions).

In the over five months of adjustments, May and June were the most capital-scarce periods, with only USD 1.201 billion in inflows over those two months. This pessimistic situation is now reversing. July and August saw inflows of USD 2.696 billion and USD 5.09 billion, respectively. These capital inflows indicate recognition of the prices within the new high consolidation zone and a positive outlook on the long-term prospects of the second half of the bull market.

BTC ETF Channel Funds: US Stock Market Trends and Future Prospects

The sentiment of BTC ETF channel funds, closely tied to the US stock market, has become the most critical factor determining market direction.

Will the US economy achieve a soft landing or a hard landing? Based on current US stock market trends, the overall market leans towards a soft landing for the US economy, so it has not initiated a general downward repricing in anticipation of a hard landing. Under the assumption of a soft landing, some funds are choosing to exit the "Magnificent Seven" (which have outperformed the Nasdaq significantly this month) and enter other blue-chip stocks with lower price gains, pushing the Dow Jones index to an all-time high.

Based on past experience, we tend to believe that US stock market investors view BTC as an asset similar to the "Magnificent Seven"with great potential but currently overvalued. This has led to large-scale selloffs, largely coinciding with the selloff of the "Magnificent Seven." However, compared to mainstream funds, the "Magnificent Seven" hold a much stronger appeal than BTC. Therefore, after a sharp decline, the rebound of the "Magnificent Seven" is more robust than that of BTC.

Future Outlook: Multiple Factors Influencing BTC Trends

If the 25 basis point interest rate cut is confirmed on September 25, and no major economic or employment data indicate that the economy is not on track for a "soft landing," the US stock market will run steadily. If the "Magnificent Seven" repair upwards, BTC ETF inflows are likely to resume, pushing BTC upwards and challenging the psychological barrier of USD 70,000, potentially even reaching new highs.

If any major economic or employment data indicate that the economy is not on track for a "soft landing," the US stock market is likely to correct downwards, particularly the "Magnificent Seven." Correspondingly, BTC ETF channel funds are unlikely to be optimistic, potentially leading to a BTC decline that tests the lower boundary of the "new high repair period" at USD 54,000.

The most optimistic scenario is a simultaneous upward repair of the "Magnificent Seven" and positive inflows of stablecoins and ETF channel funds, driving BTC upwards. In this case, breaking through previous highs would have a high probability of success.

Conclusion: Patience in Awaiting a Breakthrough

BTC broke through USD 54,000 in January, reached an all-time high in March, and entered a consolidation phase in the "new high consolidation zone" in April. This has lasted for over five months, nearing the six-month consecutive rally since last September. From a time perspective, it is approaching a trend turning point.

A true breakthrough still depends on the confirmation of favorable macroeconomic and US economic core data, followed by mainstream funds flowing back into the BTC ETF channel. Currently, the market has no profit-taking positions other than Mt. Gox, indicating that there is no possibility of further sharp declines based on rational analysis. The current price is not the bottom but is close to it. As long as you are not buying garbage altcoins or VC coins with high inflation, there is generally no need for concern. The longer the time, the higher the turnover, the lower the selling pressure, and the better the positive news for BTC is, the more likely it is to break through the consolidation.