Bitcoin price big dump, Spot ETF may become the key to stop the fall

Recently, the price of Bitcoin has rapidly fallen below the important support level of $56,000, making traditional technical analysis difficult to cope with. In this moment of market panic, we need to return to the fundamentals and analyze the price trend of Bitcoin from the perspective of supply and demand in order to find the best buying point in an emotional market.

The current sell-off mainly comes from several sources: first, the government of a certain country selling confiscated Bitcoin; second, compensation from creditors of a certain exchange; and third, profit-taking and follow-up sell-offs by miners since the beginning of the year. These sell-offs mainly occur on cryptocurrency exchanges and can be tracked through on-chain behavior monitoring.

On the buy side, it is mainly the investors of the US Bitcoin Spot ETF who participate through stock accounts. Due to the US National Day holiday, ETF trading was suspended and will resume tonight. The trading volume and net inflow/outflow indicators of the ETF are worth closely monitoring.

In the long term, the buying power this year may continue to exist. This is mainly due to the macro environment in the second half of the year: expectations that the U.S. will cut interest rates, which is beneficial for the rise in risk asset prices; a certain political figure's campaign prospects look good, which may improve the regulatory environment for cryptocurrencies. By analyzing the correlation between Bitcoin prices and U.S. stocks over the past six months, it can be found that the recent sharp fall over the past two days is related to the ETF market closure preventing purchases.

From the perspective of Bitcoin futures trading volume on a certain exchange, institutional investor sentiment remains relatively stable, possibly waiting for a bottom-fishing opportunity. In the context of macroeconomic benefits but with short-term special selling pressure, this non-repetitive event may present buying opportunities for long-term bullish investors in Bitcoin.

The performance of Bitcoin Spot ETF after resuming trading on July 5 is worth paying attention to. Recently, the mood in the US stock market has been optimistic, with several tech stocks reaching new highs. Whether Bitcoin ETF buyers will follow the decline in coin prices or imitate the US stock market to bottom out will provide important signals. Among them, intraday trading volume and after-hours net inflow data are core observation indicators. Higher trading volume represents bottoming enthusiasm and is expected to issue a stop-loss signal; if it can bring net capital inflow, it will further enhance investor confidence.

In terms of selling pressure, the main sources are the Bitcoin seized by a certain country's government and the Bitcoin to be compensated to creditors by a certain exchange. The government of that country has seized approximately 50,000 Bitcoins, of which about 8,000 have been transferred out, leaving 42,000 unsold, and there is uncertainty regarding whether there will be a large-scale sell-off in the short term. From the exchange's side, it is expected to compensate creditors with 142,000 Bitcoins, but reports suggest that over 70% of the debts may have been acquired by institutional buyers, and the actual selling pressure may be lower than market expectations.

In addition, miner sell-offs are also a factor influencing this round of fall, but this portion of selling is usually in line with the market and is expected to stop as Bitcoin stabilizes. Due to the halving of mining rewards at the beginning of the year, miners' profitability has fallen to its lowest in two years, and some unprofitable miners may be forced to liquidate and exit.

Overall, the buying pressure is based on long-term optimism, while the selling pressure stems from panic caused by special events. This unique situation may create buying opportunities for investors who are bullish on Bitcoin in the long run. According to past experience, the market typically digests the emotional fallout from such special events within two months. This round of decline began on June 7th, and it is expected to gradually be digested after August 7th, while the largest single-day drop recorded in the past two days may represent the lowest point of this decline.