A liquidity crisis bursted, the bell of despair rings? ! | WTR 6.13
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Recap of this week
Observe the recent chip distribution map, around 24700there are intensive chip transactions, there will be some support or pressure.
26800–32300 approximately 2.45 million chips
- 94%chance of price staying below 26800–32300
Weekly Important News
1. The yen has depreciated to its lowest level since April 2002, with the present value around 134 dollars.
2. Europe released the producer price index (PPI) data for May, which directly rose above 37%.
The European Central Bank plans to raise interest rates by 25 basis points in July, clearly signaling its first rate hike since 2011, and signaling that it may raise rates more aggressively in September to combat high inflation. The ECB also said it would stop net purchases of member states’ debt.
1. The Japanese government has been buying government bonds since the beginning of the year. The Japanese market was also selling treasuries, driven by the opposite monetary policy divergence. Japan’s rising foreign exchange costs offset the appeal of higher US Treasury yields.
Japanese life insurers expect the yen to rise to around 140 to the dollar.
2. In the eurozone, the bond yields of Greece, Italy and other countries are significantly decouped from those of Germany and France. There will also be more divisions within the EU as the ECB’s policy of raising interest rates may not last long to prevent southern Europe from coming under pressure from higher borrowing costs.
The World Bank expects global growth to slow to 2.9 percent this year from 5.7 percent in 2021, with a high probability of global stagflation. In this context, investors should be hedging to deal with a possible economic black swan event.
US macroeconomic indicators:
The US non-quarterly CPI in May was 8.6% year on year, higher than the expected 8.3% and the previous 8.3%, higher than the peak 8.5% in March and the highest in nearly 40 years.
The unadjusted core CPI was 6.0% yoY, slightly above expectations of 5.9%, but down from 6.2%, marking the second straight month of decline.
(Figure below: US CPI breakdown data, source, CICC)
1) Food and energy rose on a monthly basis;
2) The price of travel services has soared, because the retaliatory travel we mentioned before is also expected;
3) The price increase of goods excluding food fell more slowly.
Target, the big US retailer, cut its second-quarter earnings forecast to 2 per cent, less than half the 5.3 per cent it expected three weeks ago, as it realised inventory problems were worse than expected.
Target said it was taking steps to “rebalance” its inventory, which would include promotional campaigns and cancellations of orders from suppliers.
Wal-mart’s inventory rose about 33% in the first quarter, while Kohl’s increased 40%. In order to clear the excess inventory, the mall will carry out a large-scale price reduction promotion.
Michigan Consumer Sentiment index for May
The Conference Board and the University of Michigan compile separate consumer confidence indices. The biggest difference between the two indices is that the former reflects “general private consumption” and “employment” while the latter reflects “consumption of durable goods”.
(Chart below: US consumer confidence index, source MacroMicro)
Blue line: Conference Board Consumer Confidence index
Red line: University of Michigan Consumer Confidence index.
The new University of Michigan consumer sentiment index, released in May, was 50.2, down from 59.10, the lowest level since 1980.
Federal Reserve Policy
Markets are starting to price in a 75 basis point rate hike in June-July.
The CME Fed Watch tool puts the probability of a 50 basis point hike in June at 76.8 percent and the probability of a 75 basis point hike at 23.2 percent.
Fed swaps show markets are pricing in a 50 basis point hike at each of the Fed’s June, July and September meetings, but there is a 50 per cent chance of a 75 basis point hike in July.
In terms of CPI: the rise exceeded expectations mainly due to the acceleration of food and energy prices and the slower than expected decline in the commodity component of the core inflation index.
We have repeatedly mentioned in the report that CPI will slow down.
Private consumption accounts for 70 percent of U.S. GDP, and falling consumer confidence is a leading indicator for the economy over the next six months to a year.
A new low in the Michigan consumer index suggests consumers are becoming more pessimistic about the market.
Consider the correlation between consumer confidence and oil prices.
(Relationship between consumer confidence and oil prices, source: Bloomberg)
Blue line: Oil prices
White line: Conference Board Consumer Confidence index
As the red box shows, in 2007 and 2008 the price of oil rose and consumer confidence fell. The Lehman brothers crash came after oil prices fell.
As the green box shows, oil prices are also rising rapidly. Consumer confidence has also fallen.
• If oil prices rise above $125, it will be a destruction of consumer demand.
• If you go up to $150, the destruction of consumption will be even greater.
Rising oil prices and food, the two biggest factors affecting consumer confidence, are beyond the fed’s control.
In addition, retailers, supermarkets are currently too high inventory, reflecting the contraction of American consumption, consumers “wallet” is not optimistic. This part will need to be verified by next week’s May retail sales data.
Fed policy: We think a September rate hike can be ruled out given the current CPI situation.
Main Market Performance:
1. The S&P ended the week down 5.05% at 3900.86. The Dow lost 4.58 percent to end the week at 31392.79, while the Nasdaq lost 5.60 percent to end the week at 11340.02.
2. WTI Crude futures for July ended the week up 1.51 percent at $120.67 a barrel.
3. Gold futures for August delivery rose 1.4% this week to $1,875.50 an ounce.
4. The dollar index closed around 104.20, up nearly 2 percent for the week.
5. The benchmark 10-year Treasury rose nearly 22 basis points to close at 3.18%
“Be bullish on commodities and inflation-indexed bonds, both of which will benefit in a stagflation environment,” said Jensen, Bridgewater’s chief investment officer. If the Fed commits to getting inflation below 2%, stocks could fall another 20%.
CICC forecast that the U.S. stock market valuation reasonable position from the current price still has 11% to 14% of the contraction space.
We believe that the current stronger-than-expected CPI data, coupled with expectations of a pullback in consumption for some time, combined with the Fed’s hawkish tightening policy, will continue to exert considerable pressure on financial markets.
The market is likely to continue the double killing of stocks and bonds for a while, with the next step looking at the 10-year Treasury rate rising to around 3.5%.
Stocks also have some room to fall.
1. Tron DAO Reserve is buying $50 million worth of BTC and TRX as reserves.
2. Arrington Capital launches $100 million growth fund for Moonbeam.
3. Felix Capital launches $600 million fund to back Web3 startups.
4. Ledger launches $110 million early-stage fund with Cathay Innovation
5. Cronos launches $100 million accelerator program to support DeFi and GameFi startups.
1. SthETH is out of anchor, current price is 0.96:1 to Aether.
2. Block subsidiary announces “Web5” to return ownership of data and identity to individuals.
3. Former Employee of Terraform Labs: Do Kwon moved $80 million a month before UST crashed。
4. Brazil’s central bank governor: Allowing the country’s private banks to issue their own stablesoin.
Long-term Insights: To see how we’re doing in the long run; Bull/bear/structural change/neutral.
Mid-term probe: To analyze where we are now, how long we are in this phase, what will happen.
Short-term Watch: used to analyze short-term market conditions; And the likelihood of certain directions and certain events occurring under certain conditions.
· Hash Rate
· Long-Term Holder Market Inflation Rate
· Stablecoin/Btc Market Cap
· Realized Cap HODL Waves
· UTXO Realized Price Distribution
· ETH: Ethereum Transaction Type Breakdown
Miners may be fluctuating so violently that there are currently some signs of a decline in computing power.
All of this is dynamic; A process like this may occur:
Main machine shutdown — Difficulty reduced — Revenue increased — Main machine power-on — Revenue reduced — Main machine shutdown.
This is a process of repeated game grinding.
(Long-term investor inflation rate)
The long-run inflation rate is actually much lower than it was at the end of 2020.
And the present price has recently shown a higher inverse ratio.
And the price is more depressed, even there is not much room to rise, but directly under the kill.
From this point of view, the undertaking force compared to the year before there is a substantial decline.
(Ratio of stablesoin to Bitcoin market capitalization)
- the red line: USDC
- the purple line:USDT
Judging from this wave of downkill, users prefer to put coins on USDC.
USDC market cap ratio has broken new highs, USDT is still more hesitant.
The USDC has become more trusted.
(Investor status for more than 1 year)
Investors with more than a year of experience have not collected many chips in the past week.
The accumulation of long-term traders is not very rich, warning time has to wait.
(Chip structure distribution on the chain)
From 29,000 to 40,000, about 4.4 million chips are concentrated, and the whole chip has formed a top-heavy situation.
These chips may be locked up will bring greater pressure to the whole market environment, the market in the future also need a lot of time to digest.
(Percentage of types used for transactions on the Ethereum chain)
NFT as a percentage of total ETH transactions began to decline.
NFT fell 36.2% year-on-year to 23.375% from 36.614% last week.
Similarly, pure Ethereum transfers were up 5% year over year.
Fewer investors are buying NFT, and investors and art holders may face liquidity problems in the future.
- Global Supply Change
- Stablecoin Exchange NetPosition
- Top Tier Stablecoin Supply
- Non-Zero 30-day Change
- Supply Last Active Held by Long-term Holders
- Supply Last Active Held by Short-term Holders
- Illiquid Suplly
- Miner Net Position Change
- Hodler Net Position Change
- Long-term Holder Net Position Change
(Figure below: global time zone price changes)
There is a slight shift in sentiment in the Asian zone, which is now no longer the peak of price growth, but some decline.
Euro, the United States time zone fell still narrowing.
(Figure below stablecoin monthly position)
USDT shows a large outflow,
USDC also showed outflow, but showed some hesitation after outflow.
The loss of market purchasing power is not a good thing.
From the perspective of circulation, we can see the trend of the head address of the stablecoin.
(The figure below shows the supply occupied by the stablecoin top address)
Combined with the stablecoin monthly position,
After the occurrence of black swan, the head address flux of USDC decreased continuously, and they still showed a state of loss in the current supply.
The USDT head address fluctuates, hesitates;
(The figure below shows the change of addresses with non-zero balance in 30 days)
The address number of non-zero balance of stable currency fluctuates slightly in the specified area.
In terms of the 30-day slope, there was not much growth and even negative growth.
This means that the trend for new users is negative and there may be user defections.
Then look at overall market sentiment.
(The following figure shows that the whole market does not realize the break-even ratio)
Insight into emotions from a rational framework,
Fewer than 20 per cent are profitable.
The mood shifted to a degree of panic, while there was still a glimmer of hope.
(Chart below long term traders unspent supply)
Long term traders have seen volatile selling, but the volume is not too large and may have an impact in the near term.
(Chart below short term traders unspent supply)
Short term traders are adding to their positions in hesitation and are still hovering overall.
Then look at the movement of the decisive group in the market.
(Chart of illiquid supply)
The cash group flows into illiquid addresses (partial accumulation) at a slower rate, but from the behavioral insight, they are in a state of holding on to the chips in the opponent.
In the near future, they may be inclined to collect chips with reasonable market psychological expectations, but they should pay attention to the impact of market price changes on their emotions.
For now, growth is stagnant.
Look at the change of spot groups.
(Net position of miners below)
(Below hodlers net position)
(Chart below long-term trader net position)
Miners showed slight overweight;
Hodlers increase their holdings;
Long-term traders have slowed down selling.
- Options Open Interest Put/Call Ratio
- Options Strike Price
- Liquidation Dominance
- Short-term Holder Supply
- Profit/Loss Transfer
- Realized Cap HODL Waves
- Short-Term Holder Supply in Profit
- BTC Exchange Net Position
- Stablecoins on Exchange
- Stablecoin Exchange Net Position
- ETH Addresses in Profit
- ETH Addresses with balance 10k-100k
- ETH Balance on Exchanges
- ETH No. of Transactions
(Figure below: Ratio of put/call positions)
The ratio of put/call positions remained high and rose slightly in the short term.
This represents that most mature traders in the current market still maintain a more cautious attitude, continue to hold the bearish protection of the future market continued to fall risk.
(Below is the exercise price)
Put protection around 179 BTC around $26000
Put protection around 1466 BTC around $25000
Put protection around 1390 BTC around$ 26000
Established about 1362 BTC put protection around $27000
(Chart: Long liquidation advantage)
Recently, there has been a relatively obvious liquidation long behavior. In the short term, there is a high risk of high times short and long, and there is a possibility of liquidation on both sides of the market fluctuation.
Special note: Above is WatchToweR exclusive database ~
(The futures projected leverage ratio below)
Within a month, futures estimates of leverage continued to climb, and the “bet” sentiment remained.
In the context of gradual macroeconomic contraction, leverage is still high in the short term, trading in the spot market is weak, and derivatives have become the temporarily dominant factor in the market, which is not a good signal.
Short-term market sentiment and potential selling pressure:
(Figure below: total supply of profits for short-term traders)
Short-term traders’ confidence has been dealt a huge blow as their profit status has approached zero.
In the bad state of the market, the market panic led to sustained loss selling, is the main reason for the depth of the market decline.
(Figure below loss transfer)
The margin of loss selling pressure in the recent market continues to rise.
The main reason for this is the spread of panic in the market in the short term. In the market with little liquidity, a large amount of money for small transactions caused the market to fall.
The short-term slowdown in sentiment takes time and space to recover.
Special note: Above is WatchToweR exclusive database ~
(Chart below traders who hold for 3–6 months)
Specific to the time node, part of the loss of selling traders hold for 3 to 6 months.
(Chart below total supply for short traders)
But short — term traders total supply, in the near future increase is still obvious.
This is certain to undertake in the short term, but the market is not stable, if prices continue to fall will become potential pressure in the future market.
(Below, BTC exchange net position)
BTC exchange net position in the short term also has a certain inflow of exchanges, the market’s potential selling pressure has increased.
Special note: Above is WatchToweR exclusive database ~
(The balance of stablecoin in the figure below)
Blue: USDC exchange balance
Green: USDT exchange balance
The USDC exchange balance continued to decline in the short term.
The USDT exchange balance has increased slightly in the short term.
In the process of macroeconomic contraction and leverage risk continues to climb, incremental capital willingness appears to be very weak.
(USDC net position below)
USDC exchange net position volatility is small, market funds are still largely in wait and see.
(Figure below: USDT exchange net position)
The USDT exchange saw a slight inflow of net positions, with market funds still mostly in wait and see.
Depressed market sentiment, short-term traders are still increasing their holdings, potential selling pressure rising, lack of purchasing power.
Next, add ETH data:
Recently, stETH and ETH temporarily broke anchor, causing some selling pressure in the market, the leverage still exists potential risks, is still in the short-term digestion.
In the economic situation is not good, the market still need to keep certain attention to the event.
(Figure below ETH profitable address percentage)
Ethereum profitable addresses hit a 22-month low.
Compared with Bitcoin, Ethereum has greater volatility. From the perspective of the “herd effect” of behavioral finance, the spread of panic makes traders rush to sell in the short term, leading to a deep drop in ETH in the short term.
From the perspective of loss aversion in behavioral finance.
The pain of loss must decisively outweigh the joy of gain.
This psychology leads traders to make biased and wrong decisions, since it usually takes twice as many positive gains to cover their negative losses.
This is also why profitable addresses in Ethereum are declining: traders are choosing to hold them at a loss, since the majority of non-profitable addresses appear in the last two years and would be more profitable if they were sold entirely.
And it makes them more willing to sell on the bounce and return.
It also reflects the emotional and confidence struggles of those who own Ethereum in the short term.
（Below ETH： 10K-100k addresses）
The panic spread to the big guys, with 10K-100K Ethereum addresses continuing to fall, which has been one of the major selling pressures in the near term.
(Below ETH Exchange balance)
Short-term exchange balances continue to rise, and the potential selling pressure on Ethereum continues to rise under the recent volatile market.
(Figure below ETH transaction number)
The number of deals has risen slightly recently, but not dramatically.
In the market with low liquidity and high panic, there was a lack of sufficient undertaking force and a few large transactions, resulting in the continuous decline of ethereum price.
In the context of macroeconomic contraction, the panic caused by the stETH anchor incident spread, and the market lacked the strength to undertake, and the chain panic selling was the main reason for the decline.
In the following market, pay attention to this leverage risk, can wait for the market risk smoothing before making a cautious trading decision, or hedge risk.
According to a Forbes survey, 30% of the world’s billionaires have direct or indirect investments in cryptocurrencies.
The Japanese prime minister said that the Web3 industry is an opportunity for Japan’s future economic growth.
Japan may have overreacted to Web3 by stomping on Web2.
However, in the face of new technological changes, groups that did not enjoy the technological wave in the last round will be more eager to pursue the next round of technology.
Without the paradigms of the previous wave, there will be greater acceptance of newer technologies. Of course, the most important thing for such a country is to work hard and build even when the market is bad.
It is clear that Web3 will lead a new wave of billions.
In the new wave, there will be many upstarts like bamboo shoots after a rain, of course, all this will take time.
In our view, the market will continue to double-kill equities and bonds for some time, with the next step seeing the 10-year Treasury rate move to around 3.5%. Stock market also have some room to fall.
Watch next week:
1. June 14 US Producer Price Index
2. June 15 U.S. retail sales data for;
3. June 14–15 Fed June Meeting
On-chain Long-term Watch：
1. Compared with the previous two years, the market undertaking force has decreased greatly;
2. The market gives USDC more credit than USDT;
3. The status of mature investors with more than 1 year is in a gentle stalemate.
4. There are 4.4 million chips accumulated from 29,000–40,000 dollars, which will take a long time for the market to digest.
5. NFT decreased 36.2% year-on-year, to 23.375% from 36.614% last week; NFT may trigger liquidity risk.
- Market Tone Set:
Last month, on May 16, the report noted in its long-term insight that less than $24,500 might be a better entering postion. It has now been proven.
The outlook remains the same: Be prepared for a turbulent year.
On-chain mid-term probe:
1. The price rise in the Asian time zone decreases slowly, while the price decline in the European and American time zone becomes narrow;
2. USDC outflow stagnates and seems to be hesitant, while USDT outflow is more direct;
3. In terms of overall flux, the top address of USDC are lost, while the top address of USDT is still hesitant;
4. The wallet address has a negative growth, with a certain degree of loss.
5. Market sentiment is expressed as a degree of panic;
6. The growth of decisive groups stagnates;
7. There was a slight increase in young miners’ holdings; Hodlers are still adding to their holdings; Long — term traders reduced their holdings.
- Market tone set:
A degree of panic; Spot key group overall selling volume is not large, decisive group trying to collect chips, but the lack of market purchasing power is one of the key factors leading to liquidity crisis.
On-chain short-term observation:
1. Short protection remains high;
2. Futures projected leverage continues to climb;
3. Obvious long liquidation;
4. Short-term holders are still buying;
5. Potential selling pressure rises;
6. The stable currency balance is partial to stock, the recent flow is small, the purchasing power is insufficient;
7. The recent stETH anchor incident caused the spread of emotional panic, leading to the continuous decline of ETH price;
8. ETH panic transformed to large households, 10K-100K addresses, continued to decline;
9. ETH potential selling pressure continues to rise;
10. ETH transaction number increased slightly;
11. 94% chance of not breaking 26800–32300.
- Market tone set:
The overall market belongs to the panic transmission stage. At present, for ETH, this stage has been transmitted to large households with weak market acceptance and insufficient purchasing power.
All the above are market discussion and exploration, and does not contain directional investment guidance; Please be cautious and guard against the market black swan risk.
This report is provided by the “WatchToweR” Research：
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