Market Analysis After the Big Dump in Bitcoin Prices: Supply and Demand Relationship and Potential Buying Points

Recently, the price of Bitcoin has rapidly fallen below the important support level of $56,000, making it difficult for traditional technical analysis to cope. In this moment of large-scale panic, we need to return to the fundamentals and analyze the supply and demand relationship of Bitcoin to help investors find the best buying points in the chaotic market.

Sell Order Analysis

The main sources of selling pressure currently include:

1. The German government sells seized Bitcoin
2. Mt. Gox exchange compensates creditors
3. Possible profit-taking of gains at the beginning of the year
4. Miners follow the market sell-off

These sell orders are mainly conducted through cryptocurrency exchanges and can be monitored and tracked through activities on the blockchain.

Buy Order Analysis

The potential buying pressure mainly comes from investors in the US Bitcoin spot ETF. These investors participate through stock accounts and can be tracked through the ETF's intraday trading volume and after-hours fund flow indicators.

It is worth noting that the US stock market will be closed for 1.5 days during the Independence Day holiday from July 3 to 4, which may affect the trading situation of Bitcoin ETFs.

Bitcoin ETF may bring the first wave of bottom-fishing demand.

In the long term, the buying power this year may continue to exist, mainly driven by the following factors:

1. The U.S. may lower interest rates, which is beneficial for the price increase of risk assets.
2. The results of the US election may have a positive impact on the cryptocurrency regulatory environment.

By analyzing the correlation between Bitcoin prices and the US stock market over the past six months, we found that the sharp fall in the last two days is somewhat related to the closure of the Bitcoin spot ETF.

From the perspective of CME futures trading volume, institutional investor sentiment is relatively stable, possibly waiting for a bottom-buying opportunity. The trading volume of CME Bitcoin futures has not significantly fluctuated with the coin price, indirectly proving that institutional investors are in a wait-and-see state.

July 5 ETF trading resumption may provide important signals

The performance of Bitcoin spot ETF after resuming trading on July 5 is worth paying attention to. Recently, the sentiment in the US stock market has been optimistic, with several tech giants' stock prices hitting new highs, and investors have made considerable returns by bottom-fishing in Tesla. Whether buyers of the Bitcoin spot ETF will follow the price drop or imitate the behavior of bottom-fishing in the US stock market will become the focus of market attention.

Key observation indicators include:

1. Real-time trading volume during the day
2. After-hours net capital inflow data

A higher trading volume may indicate a strong willingness to bottom-fish, potentially signaling a stop to the fall. If it can bring about actual net capital inflow, changing the previous trend of slight net outflows, it will further boost the confidence of cryptocurrency investors.

Detailed Analysis of Sell Orders

The German government holds Bitcoin

The 50,300 Bitcoins confiscated by the German government may be the largest source of selling pressure in the short term. Since June 19, the German government has transferred approximately 8,080 Bitcoins and currently holds 42,270 Bitcoins, accounting for 83.94% of the total. It remains uncertain whether this portion of Bitcoins will continue to be sold off in large quantities in the short term.

Mt. Gox compensation situation

Mt. Gox is expected to compensate creditors with 142,000 Bitcoins. According to news from the Japanese crypto community, more than 70% of the claims may have been acquired by institutional buyers through over-the-counter trading, and this portion of Bitcoins is not expected to bring significant selling pressure.

Among the approximately 40,000 to 50,000 Bitcoins that may bring significant selling pressure, Mt. Gox has transferred about 50,000 on July 5, of which 1,544 were transferred to exchanges, and 47,228.7 were moved to new addresses with no further movement yet. Overall, the actual selling pressure generated by Mt. Gox may be lower than the market expectations.

miner sell-off

Due to the halving of Bitcoin mining rewards, miners' profitability has fallen to its lowest level in two years. Some unprofitable miners may be forced to liquidate and exit, bringing potential selling pressure. This selling is expected to cease once Bitcoin prices stabilize.

Conclusion

The current sell-off is mainly driven by panic triggered by special events, while the buying pressure is based on long-term positive factors. This non-repetitive event may present buying opportunities for investors who are optimistic about Bitcoin in the long run.

Based on past experience, the market's sentiment digestion of selling pressure from special events generally does not exceed two months. This round of Bitcoin's fall started on June 7, and it is expected to be gradually digested by around August 7. The maximum single-day drop recorded in the past two days may be the lowest point of this round of decline.