Bitcoin price falls below key support level, analyzing the status of buyers and sellers to find the best buying point

After the price of Bitcoin fell below the important support level of $56,000, traditional technical analysis methods struggle to determine the market direction. In this moment of widespread panic, we need to return to the fundamentals and analyze the supply and demand relationship of Bitcoin in order to find the bottom of this decline.

Buy Order Analysis

In the long term, the buying power this year may continue to exist, primarily driven by two factors:

1. The U.S. may cut interest rates, driving up the prices of risk assets.
2. Changes in the political situation may benefit the regulatory environment for cryptocurrencies.

By analyzing the correlation between Bitcoin prices and the US stock market over the past six months, we found that part of the sudden fall in the last two days is due to the Bitcoin spot ETF being closed for trading, making it impossible to subscribe.

From the perspective of CME futures trading volume, institutional investor sentiment is relatively stable, possibly waiting for a bottom-fishing opportunity. On July 5th, the trading volume of CME Bitcoin futures did not fluctuate significantly with the price of the coin, indirectly proving that institutional investors are maintaining a wait-and-see attitude.

The performance of Bitcoin spot ETFs after resuming trading on July 5 is worth paying attention to. Recent sentiment in the US stock market has been optimistic, with tech stocks hitting new highs, and investors may follow the overall trend of US stocks to bottom-fish Bitcoin ETFs. It is essential to focus on the intraday trading volume of the ETFs and the net capital inflow after hours, as these indicators may provide signals for a halt in the fall.

Sell Order Analysis

The current main selling pressure comes from two aspects:

1. Bitcoin seized by the German government
2. Mt.Gox exchange compensation to creditors in Bitcoin

The German government has seized a total of 50,300 Bitcoins. As of July 5, approximately 8,080 have been transferred out, leaving 42,270 coins (, which accounts for 83.94% ) and have not yet been sold. There is still uncertainty regarding the selling pressure in the short term.

Regarding Mt.Gox, it is expected to compensate creditors with 142,000 Bitcoins. According to reports, more than 70% of the claims may have been acquired by institutional buyers through over-the-counter transactions, and this portion of Bitcoins is expected not to bring significant selling pressure. The remaining 30%, approximately 40,000 to 50,000 Bitcoins, may cause selling pressure. On July 5th, Mt.Gox transferred approximately 50,000 Bitcoins, of which 1,544 were sent to exchanges, and 47,228.7 were transferred to a new address with no further developments.

In addition, miners may also become a potential source of selling pressure. Due to the Bitcoin mining reward halving, miners' profitability has dropped to its lowest level in two years. Some unprofitable miners may be forced to liquidate and exit, bringing additional selling pressure.

Conclusion

Overall, the buying pressure is based on long-term positive factors, while the selling pressure mainly stems from panic emotions caused by special events. These non-repetitive events may create buying opportunities for investors who are optimistic about Bitcoin in the long run.

Based on past experience, the market's emotional digestion of special event sell pressure usually does not exceed two months. This round of decline began on June 7 and is expected to gradually be digested by around August 7. The maximum single-day decline recorded in the last two days may be the lowest point of this round of decline.