Article Source: Words Beyond Words
The last time Bitcoin broke through $100,000 was on December 5th last year. I remember we published a retrospective article at the time and sold part of our Bitcoin holdings. As shown in the image below.
Today (Beijing time, May 8th), the Federal Reserve decided to continue pausing rate cuts and maintain the current interest rates. Powell also reiterated that the Fed is not in a hurry to cut rates. This result basically met the market's previous expectations, so the market did not experience significant fluctuations.
In yesterday's article (May 7th), we mentioned several major macro factors affecting the current market trend, including the economic development prospects of the United States, the Fed's rate cut expectations, and the political situations in some countries/regions.
Regarding rate cuts, the market still expects a cut in July, and according to the Fed Watch Tool, the probability of a rate cut in July is currently 55.9%. As shown in the image below.
As for the global situation, the news currently focuses mainly on the conflict between India and Pakistan. In the recent conflicts, Pakistan claimed to have shot down 5 Indian fighter jets and 1 drone (which India denies). From the available information and data online, it seems to indirectly show the actual combat effectiveness of Eastern weapons. The military industry index has been rising well these past few days, possibly related to this matter.
In yesterday's article, we also mentioned that if Powell's speech meets market expectations, Bitcoin might challenge the $99,000 position. As of the time of writing, Bitcoin's price is around $98,700, seemingly attempting to break the $100,000 mark again. As shown in the image below.
1. What is driving the current Bitcoin price?
After existing variables (including tariff issues, rate cut expectations, etc.) are gradually digested by the market, new variables will have a short-term impact on the market.
From the current macro situation, the India-Pakistan conflict seems to be a new variable. For such geopolitical conflicts, market reactions are often inconsistent. For example, some investors (funds) may choose to turn to gold as a hedging tool, while others might use Bitcoin as a hedging tool.
Since the beginning of this month (May), with global situation changes, Bitcoin has again touched around $97,000. However, from the current comprehensive development of the crypto market, although Bitcoin has been declared part of the U.S. strategic reserve plan (currently only in the planning stage), it does not yet possess the attributes of a global safe-haven tool. Currently, it feels like Bitcoin's rise is more driven by news and mainly driven by institutional hedging and speculation.
Combining the ongoing tensions in some countries/regions, this might cause a Short Squeeze, where previously over-leveraged short positions may be cleared by the market, pushing Bitcoin back to $100,000 or even higher.
However, whether this price increase is sustainable or how long it can last remains a question.
As for how to deal with the current market, it depends on your personal position and risk appetite. As we mentioned in the previous article: Opportunities and traps can appear simultaneously. Unless you are a very determined long-term Bitcoin holder, it's best not to be fully invested during a bull market (currently). Protecting profits is more important than gaining more risky profits, or you might miss greater opportunities in the next cycle.
In our view, the core and underlying logic of the market is still liquidity. Without fundamental changes in liquidity, rapid price increases are both opportunities and risks in the short term.
2. Soaring Bitcoin and Emerging Stablecoins
Global tensions can not only somewhat drive up gold and Bitcoin prices but also cannot ignore stablecoins.
Currently, stablecoins seem to no longer be exclusive to the crypto industry but have become a broader trading currency in some global contexts (like digital dollars). Although there's no clear data support online, we can speculate that with escalating India-Pakistan conflicts, USDC or USDT might become an important hedging tool for some investors in both countries, potentially causing a surge in stablecoin demand.
In the development history of the crypto industry, we believe stablecoins have been the most successful and have the best "breaking out" effect, followed by Bitcoin. This might also reflect the issue we mentioned in previous articles, as shown in the image below.
Crypto market cap relies on stablecoins, but the issuance of stablecoins in this cycle continues to break historical records, while the growth of crypto market cap does not meet theoretical expectations. The core reasons might be concentrated in several aspects:
- Mainly used to purchase Bitcoin, unlike previous cycles that aimed to boost altcoin market cap
- Many are used for on-chain DeFi activities and exchange financial products (especially USDC)
- Used in specific "breaking out" scenarios, such as certain illegal or gray transactions, cross-border remittances, cross-border consumption, etc.
Anyway, as we said in the previous article: The current market seems to have reached another critical moment of choice.
In the short term, tariffs and rate cuts have been largely digested by the market. The current new variable is geopolitical conflict (currently mainly the India-Pakistan conflict). People seem to no longer focus on the fundamentals of the crypto market, and prices are now mainly driven by news (such as headline reports, Trump's tweets, Powell's speech, etc.).
On one hand, Bitcoin is now attempting to break the $100,000 mark again!
On the other hand, this breakthrough seems detached from some fundamentals. Will $100,000 become a new trap? If the India-Pakistan conflict variable suddenly changes in a few days, with India opening the floodgates and Pakistan shaking hands again, how will the market choose? What strategy will you have?
Today's article is a supplement to yesterday's (May 7th) article. At the end, we'll send the same message from yesterday's article: Under the current market sentiment, if your investment risk appetite is not high, the most prudent method in the short term is to continue maintaining sufficient cash liquidity, don't All In or be fully invested. Only when your position makes you comfortable, able to attack and retreat, can you better face potential market fluctuations. Of course, if you are a very determined long-term Bitcoin holder, you can continue to buy and reserve more Bitcoin at any time.
That's all for today. The sources of pictures and data mentioned in the main text have been supplemented in the Notion. The above content is just a personal perspective and analysis, solely for learning and communication purposes, and does not constitute any investment advice.
Article source: https://mp.weixin.qq.com/s/Omq5gP6JKTTA7yliKSR_gA
