After the bottom, before the bull market

Author:Clow，Plain Language Blockchain

On September 3, Federal Reserve Governor Waller said that he preferred to keep interest rates unchanged as long as the data allowed. This single statement triggered a $730 million inflow into the US spot Bitcoin ETF that day, setting a new single-day record since January, and pushing Bitcoin up to $81,000.

Upwards represents the start of a bull market, downwards represents the continuation of a bear market; we are currently standing on the dividing line.

ETFs are in a particularly awkward position. According to Glassnode's statistics, ETFs as a whole have been in a floating loss for 228 consecutive trading days, with the deepest paper loss reaching approximately $18 billion, which has now narrowed to approximately $3.9 billion.

As long as the price doesn't reach $86,000, Wall Street's largest buying channel will still be losing money.

Funds currently at a loss instinctively don't increase their positions; instead, they wait to break even. Therefore, so far, every time the price approaches this area, what we see isn't a breakout, but rather selling by those trying to break even. In early August, Bitcoin was hovering between 63,000 and 65,000. On August 19th, short positions were liquidated, causing a rapid price surge, reaching above 81,000 on September 3rd, a new high since May. Then it stopped, hovering at the lower 1.5% Fibonacci retracement level. The area below isn't a vacuum. Between 76,000 and 82,000, recent buying has been increasingly concentrated. It's difficult to break through upwards, and equally difficult to break down downwards. Why can't ETFs retain their money? The market doesn't lack money; it lacks money that can be retained. In August, US spot ETFs saw net inflows of $3.52 billion, the best month this year, compared to only $172 million in July. By the first week of September, there had been three consecutive weeks of net inflows, accumulating to approximately $3.8 billion. The trend reversed in the second week, with net outflows of $463 million over four trading days, halting the three-week inflow streak. The weekly buying volume of around $1 billion was insufficient to absorb the 1.07 million Bitcoins waiting to be sold, especially since it retreated as interest rate hike expectations intensified. On the other hand, CryptoQuant data shows that Bitcoin balances on exchanges have dropped to approximately 2.7 million, the lowest level since 2018. Withdrawals from exchanges typically indicate that holders have no intention of selling in the short term. This is one reason why prices haven't fallen significantly. The total market capitalization of stablecoins has surpassed $300 billion, with USDT and USDC accounting for over 80% combined. While not all of this capital is waiting to buy Bitcoin, it at least shows that money hasn't left the crypto market. Ammunition is plentiful, but no one is willing to fire first. On-chain data suggests that the most dangerous phase may have passed, but a recovery is still some distance away. Glassnode's "seller risk ratio" measures how many tokens are sold daily, whether in a profitable or loss-making state. This number has currently dropped to 7 basis points per day, less than half of the August peak of 16 basis points, and far below the 23 to 35 basis points at last year's high. In other words, those wanting to take profits and those wanting to cut losses have temporarily stopped. No one wants to make any big moves at the 77,000 level. Glassnode also combined dozens of on-chain indicators into a single comprehensive reading. In the week ending June, indicators showing a "cold" trend accounted for a staggering 82%, a new high for this cycle. In the most recent week, this proportion dropped to only 2%. Glassnode interprets this as the darkest phase being over. But it can also be viewed from the opposite perspective: the market is no longer cheap, and cheapness used to be its biggest attraction. In the derivatives market, futures open interest rose to a high of $37.1 billion, but the fees paid by long positions to short positions fell by 30% in a week, with rates approaching zero. High open interest and low fees indicate that new positions are primarily for hedging rather than leveraged long positions. During the surge to 80,000 in early September, long-term holders accounted for only 47% of the total realized profits across the network, compared to 88% at the August high. Long-term funds sold off in August and largely stopped in September; recent selling has mainly been by short-term holders. These data suggest that there is support at the bottom, but support is not the starting point. It can be the foundation of a bull market or a longer platform in a bear market. Everything depends on Wednesday's Fed meeting. The focus of the disagreement isn't on the blockchain, but on US Treasury bonds and the Federal Reserve. The 10-year US Treasury yield has risen to 4.96%, and the 30-year yield is around 5.25%. With annualized returns on risk-free assets approaching 5%, institutions have no reason to put money into an asset that doesn't pay interest and is highly volatile. Why are the yields so high? The issue isn't that the market expects inflation to spiral out of control; the implied inflation expectation for 10-year Treasury bonds is only 2.4%. The real reason is the excessive fiscal deficit and oversupply of Treasury bonds, leading buyers to demand higher interest rates. Even though the Treasury tripled its long-term Treasury bond repurchase program in September, yields remain high. Then, on Wednesday, September 16th, is the Federal Reserve's interest rate decision. After the August CPI rebounded to 3.4%, the probability of a rate hike, priced in by the CME FedWatch tool, has risen to 85%. If rates are raised, those worried about a "final dip" will have a very real reason to be wary; if not, those who are bullish will also get what they want. Arthur Hayes is bullish, arguing that the Treasury's buybacks of Treasury bonds and the Federal Reserve's quiet expansion of its balance sheet are essentially precursors to disguised money printing. He sets two trigger signals: the Bond Volatility Index (MOVE) breaking through 130, and the 10-year Treasury yield breaking through 5%. Once triggered, central banks will be forced to inject liquidity, and Bitcoin will surge towards $200,000. Ironically, the 10-year yield is only 4 basis points away from 5%. He also believes that politicians will be more inclined to hand out money before the November midterm elections, and the elections will at most be a "minor speed bump." However, he also cautioned in the short term that there are a large number of option positions piled up between $70,000 and $75,000, and if prices fall back, "it will be very violent." Peter Boockvar, Chief Investment Officer of One Point BFG, which manages $16 billion in assets, offered a contrasting view: The Treasury cannot prevail against the bond market, and the Federal Reserve has no room to print money. As long as the 30-year yield remains above 5%, this rebound will eventually retreat to its August starting point of $63,000 to $65,000 due to a lack of new funds. To determine who is right, look at three key indicators: Bitcoin's weekly closing price must have held above 86,000; ETFs must have seen net inflows exceeding $1.5 billion weekly for at least three consecutive weeks; and the 30-year US Treasury yield must have fallen below 5%. Of these three indicators, two are just short, and one has just broken its streak. The yield is 4 basis points away from the trigger line, the price is 12% away from the wall, and the ETF's three-week streak of inflows has been broken this week. The area between 76,000 and 86,000 is a corridor that requires patience to traverse. 75,500 is the support level, and 86,000 is the only exit point. Whether we can get through depends on next Wednesday, not the charts. That wall is still standing.