A deep analysis of the encryption market cycle and structure from the perspective of Depth.

Currently, the encryption market is attracting widespread attention, and a highly discussed viewpoint is that the "big correction" may have just begun. From an in-depth observation of the unique cyclical patterns and complex structural features of the encryption market, the current price correction of Bitcoin is by no means an isolated phenomenon; rather, it is an inevitable product of the interplay and joint effects of multiple factors.
In market operations, short-term and long-term logic often present completely different situations. In the short term, market participants tend to excessively amplify the immediate impact of information, overreacting to every little movement; however, they often lack sufficient recognition and attention to the forces driving long-term trends, leading to underestimation. This imbalance between short-sightedness and foresight lays the groundwork for market volatility to some extent.
The spot ETF, through this event, is like a giant stone thrown into the calm lake of the cryptocurrency market, stirring up ripples. The massive capital inflow at the beginning, akin to a powerful booster, propelled the price of Bitcoin to rise rapidly. However, fundamentally, this increase is not based on a significant rise in actual liquidity at present, but rather a pre-pricing of future liquidity. Market participants, driven by optimistic expectations of continued capital inflow in the future, rushed into the market, driving up the prices.
However, when the macro environment fails to fulfill the market's expectations for interest rate cuts, or the actual easing measures are far less than what the market imagines, this anticipated rise loses its support, and a price correction becomes inevitable.
The net outflow of ETF funds, the decline in market depth, and the continuous accumulation of derivative leverage are all specific manifestations of this price correction process in the market. They serve as warning signals, clearly indicating that the market is adjusting its overly optimistic expectations from earlier periods. From a macro perspective, the expectations of interest rate cuts by the Federal Reserve have already been widely disseminated in the market and fully digested by market participants. However, the policy measure of interest rate cuts does not equate to an immediate and sufficient injection of liquidity. Especially against the backdrop of ongoing inflationary pressures, the central bank's policy space is greatly constrained. On one hand, the central bank needs to seek a difficult balance between stimulating economic growth and controlling inflation.
On the other hand, there is a significant gap between the market's expectations for interest rate cuts and the actual policy measures that the central bank can implement. This contradiction makes the risk asset market exceptionally sensitive, making it more susceptible to fluctuations in market sentiment.
At the same time, the possible interest rate hike by the Bank of Japan has dropped a heavy bomb on the global carry trade chessboard, bringing tremendous variables to the global carry trade. The logic of carry trade is based on the capital allocation of interest rate differentials between different countries. A rate hike in Japan may change the flow and cost structure of global capital, further exacerbating market concerns about liquidity contraction, putting greater downward pressure on risk assets such as the encryption market.
On the technical side, a series of key indicators are sending strong signals for adjustment. The "death cross" formed by the 50-day moving average crossing below the 200-day moving average is seen as an important sign of a weakening mid-term trend in encryption market analysis. It indicates that the market's average cost in the short term begins to fall below the long-term average cost, resulting in insufficient upward momentum and increased adjustment pressure.
The rise of the ADX indicator to 40 further confirms that the strength of the market trend is increasing, and this trend is a downward adjustment trend.
In addition, the loss of key support levels is like the first domino falling, which may trigger a chain reaction and lead to larger-scale liquidations. Especially in the current environment of high market leverage, once prices fall below key support levels, many highly leveraged positions will face the risk of forced liquidation, which will further intensify the selling pressure in the market and accelerate the price decline.
It is worth noting that the movements of traditional financial institutions often contain profound strategic intentions. The Vanguard Group's decision to open encryption ETF trading during a market pullback appears simple, but there are complex considerations behind it. This is more like a carefully planned strategic layout rather than just a simple short-term bullish signal. Large financial institutions, with their vast capital scale, professional research teams, and rich market experience, are often able to go against the trend during times of market panic and significant price declines. They focus on the long-term development potential of the encryption market and the currently undervalued asset value, laying the groundwork for future market rebounds and long-term gains by positioning at low levels. However, this does not mean that a short-term bottom has already formed; the market may still continue to search for true bottom support during the adjustment.
For a wide range of investors, accurately understanding the market structure in the cryptocurrency market, a field full of uncertainty and volatility, is far more important than blindly predicting price points. At the current stage, the core logic of the market is undergoing a transformation, in a critical process of repricing risks. This is not a simple technical correction, but an inevitable stage where the market, after experiencing a rapid rise, reassesses and re-prices various risk factors. Historical data clearly shows that adjustments in the cryptocurrency market are often characterized by severe and rapid changes, with prices potentially experiencing significant fluctuations in a short period of time. However, the real value support does not come from short-term market speculation and emotion-driven factors, but from the fundamental factors of the cryptocurrency network, such as the innovative development of blockchain technology, steady growth in user numbers, and continuous expansion of application scenarios, as well as the long-term capital allocation demand based on recognition of these fundamental factors.
In this challenging and opportunity-filled market phase, the market acts like a ruthless filter, mercilessly eliminating positions built on overly optimistic expectations. These positions often lack a full understanding of market risks and response measures, making them susceptible to significant losses during market adjustments. Meanwhile, the market is quietly accumulating energy for the next cycle's launch. The interplay between liquidity, leverage, and macro policies will continue to play out, becoming key factors influencing market trends. Investors need to maintain a clear mind, pay more attention to the substantive changes in capital flow, and deeply analyze the driving factors and purposes behind the funds, rather than being merely deceived by the surface narrative of the market. Only in this way can one seize genuine investment opportunities in this turbulent encryption market and achieve steady asset appreciation.