Summary of Crypto Market Forecast and Guidance Analysis for Next Week

1. Macro trends: short-term volatility, long-term benefits

  1. The two-sided impact of the Fed’s policy:
    • Short-term pressure: Although the Fed cut interest rates by 25 basis points for the first time this week, its hawkish tone has limited the degree of optimism in market sentiment. Next week, the market may continue to digest the Fed's cautious signal on the future path of interest rate cuts.
    • Long-term support: With the easing of inflation and the complete end of the interest rate hike cycle in 2024, the long-term liquidity environment will provide support for crypto assets such as Bitcoin.
    • Key macro data:
      • The December core PCE data and consumer confidence index will be important indicators to guide market expectations next week. If the data performance is lower than expected, the possibility of further easing by the Federal Reserve will increase, which is good for the crypto market.
  2. International capital flows:
    • Bank of Japan's loose policy: The weakness of the yen and the Bank of Japan's continued loose stance will drive some international capital to flow into global risk asset markets, including Bitcoin, through carry transactions.
    • Risk factors: If the US dollar index (DXY) rebounds without significant changes in liquidity, it will put short-term pressure on the market.

2. BTC Market Prediction

  1. Capital flows and market support:
    • ETF and stablecoin issuance:
      • This week, the issuance of stablecoins slowed down to 1.639 billion (234 million per day), a significant drop from the main uptrend cycle (255 million/day). Insufficient capital inflows may limit BTC's upside.
      • ETF inflows are also at a low level. If ETF inflows fail to resume next week, the selling pressure on BTC will intensify.
    • OTC Premium:
      • The over-the-counter premium of USDT and USDC rebounded to above the water level this week, which may indicate that buying sentiment is gradually warming up. If the premium can continue to rise, it will provide short-term support for BTC.
  2. Technical support and resistance:
    • Short-term support: Pay attention to the key support range of $98,000–$100,000 . If this range is broken, BTC may test the lower support level of $95,000 .
    • Key Resistance: If BTC can hold the current support range and rebound upward, it needs to break through $105,000 to confirm the continuation of the bullish trend.
  3. Trend prediction:
    • Shock adjustment: BTC is expected to fluctuate in the range of $98,000-$105,000 . Insufficient volume and slowing liquidity indicate that the market is weak in rising in the short term, but the downward space is relatively limited.
    • Medium-term potential: If stablecoin issuance and ETF inflows pick up in the next 1-2 weeks, BTC will be expected to resume its upward trend.

3. Altcoin Market Outlook

  1. Weak pattern of altcoins:
    • This week, the Altcoin Index fell to 47 , continuing the downward trend after peaking at 88 in early December. The Altcoin market generally experienced a deep adjustment of 10%-30%.
    • OTHERS.D: The market share of tokens outside the TOP10 (OTHERS.D) is at a technical support level and may continue to test lower levels, and it is difficult to strengthen in the short term.
  2. Layer2 opportunities:
    • Long-term potential: The capital inflow of Layer2 (such as ARB, OP) is relatively stable. This week, Coinglass data showed that the monthly capital is still in a net inflow state. The current adjustment may be an opportunity for medium- and long-term layout.
    • Layout suggestions: It is recommended to focus on high-quality projects in the Layer2 sector and gradually increase positions when market sentiment recovers.
  3. Forecast of the time of the copycat bull market:
    • From the analysis of cyclical patterns, OTHERS.D is currently in a stage similar to the "yellow zone" in 2018 (bottoming out again after shock), and the copycat bull market may take 1-3 months to return.
    • Trigger conditions: If BTC market share fails to break through the 60% pressure level or USDT market share falls below the key support level, it will drive funds back to the altcoin market.

4. Key risks and opportunities

  1. Short-term risks:
    • BTC vampire effect: If BTC's market share continues to break through, altcoins may come under further pressure.
    • Insufficient capital flows: ETF and stablecoin inflows have failed to recover, and the market may face a deeper correction.
  2. Potential opportunities:
    • Improvement in USDT OTC premium: If the USDT premium continues to rise, it will indicate that funds are flowing back into the market, providing short-term support for crypto assets.
    • Loose macroeconomic policies: The Bank of Japan's continued loose stance and increased expectations of a rate cut by the Federal Reserve will inject long-term positive impact into the market.

5. Strategic recommendations

  1. Short-term strategy:
    • BTC:
      • Open positions in batches in the $98,000-$100,000 range, and set stop loss below $95,000 .
      • If it breaks through $105,000 , you can increase your position and target $110,000 .
    • Altcoins:
      • Continue to avoid weak sectors (low market capitalization, projects without actual value support) and wait for BTC to stabilize.
      • Focus on the Layer2 and DeFi sectors, and take advantage of the current adjustment opportunities to buy on dips.
  2. Mid- to long-term strategies:
    • BTC long-term holding: With the improvement of the macro environment and the recovery of institutional capital inflows, the medium- and long-term trend of BTC remains optimistic.
    • Potential opportunities for altcoins: For high-quality projects with practical application scenarios such as Layer2 and GameFi, make arrangements in stages and wait patiently for market rotation opportunities.

Next week's market summary

  • Short term: BTC maintains a volatile adjustment pattern. Insufficient market funds will limit the strength of the rebound, but the downside space is relatively limited.
  • Medium to long term: Improved market liquidity and a rebound in institutional demand will provide stronger support for BTC and altcoins, and investors can gradually deploy on dips.
  • Risk control: strictly control positions, focus on the dynamic changes in the issuance of stablecoins, ETF fund flows, and USDT OTC premiums, and dynamically adjust investment strategies.

1. Macro

1.1 Macroeconomic Data Analysis

1.1.1 Multi-dimensional interpretation of economic data: both positive and negative factors

Positive economic data: the probability of interest rate cuts has weakened

  1. US Building Permits
    • Actual value: 1.51M, higher than expected 1.43M
    • Impact : High building permits reflect an active real estate market and show the resilience of the U.S. economy. This will reinforce expectations for a continuation of the Fed’s hawkish policies , putting short-term pressure on risky assets, including Bitcoin.
  2. US final GDP quarter-on-quarter
    • Actual value: 3.1%, higher than expected 2.8%
    • Impact : The unexpected growth in GDP data shows that the economy remains strong, which increases uncertainty about the Fed’s future policies and may curb market expectations for liquidity easing.
  3. U.S. initial jobless claims
    • Actual value: 220K, lower than expected 229K
    • Impact : The labor market remains tight, showing no clear signs of an economic slowdown, which is inconsistent with the need for further rate cuts and may be bearish for risk assets such as Bitcoin in the short term.

Unfavorable economic data: the probability of interest rate cut increases

  1. US core retail sales monthly rate
    • Actual value: 0.2%, lower than expected 0.4%
    • Impact : The slowdown in retail sales reflects weak consumer spending, indicating signs of cooling on the demand side of the economy. This increases the possibility of further interest rate cuts by the Federal Reserve next year , providing liquidity expectations support for risky assets.
  2. U.S. industrial production monthly rate
    • Actual value: -0.1%, lower than expected by 0.3%
    • Impact : The decline in industrial production reflects a weakening of the economic cycle. This may increase market concerns about a recession , while further supporting an accommodative monetary policy stance, which is potentially positive for Bitcoin.

1.2 Impact of Fed policy changes

Market Watch Weekly Report: Cryptocurrency market fluctuates and adjusts, and long-term benefits are expected

1.2.1 The Federal Reserve’s December interest rate decision: the first rate cut was 25 basis points

  • Policy changes : The target range for the federal funds rate was lowered from 4.5%-4.75% to 4.25%-4.5%. Although the rate cut is seen as a signal of liquidity release, the dot plot shows that only two rate cuts are expected in 2025 (down from four expected in September) , showing the Fed's hawkish stance.

Impact Analysis :

  1. Short-term impact : The interest rate cut itself provides liquidity support to the crypto market, but the hawkish tone of the rate cut may limit overly optimistic market sentiment, thereby curbing the rapid rise of risky assets such as Bitcoin.
  2. Long-term impact : If economic data continues to be strong, the Federal Reserve may tighten its path of interest rate cuts, which will put pressure on Bitcoin's upside.

1.3 Global impact of the Bank of Japan’s interest rate meeting

1.3.1 The Bank of Japan remains on hold: liquidity spreads outward

  • Background : Despite the better performance of Japanese economic data, the Bank of Japan kept its policy interest rate unchanged and the yen remained in a long-term weak trend. Analysts believe that this may prompt global capital to flow to other markets (such as US stocks or crypto markets).

Impact Analysis :

  1. Potential positives for Bitcoin :
    • Against the backdrop of a weak yen, capital may flow into global markets through yen carry trades, and crypto assets may become an option for some capital allocation.
    • Bitcoin, in particular , may attract the attention of international investors due to its status as “digital gold”.
  2. Spillover effects on crypto markets :
    • Japanese investors may allocate more funds to Bitcoin or stablecoins to hedge against the risk of yen depreciation, which will further increase the demand for Bitcoin in the Asian market.

1.4 Easing signals from the US financial conditions index

Market Watch Weekly Report: Cryptocurrency market fluctuates and adjusts, and long-term benefits are expected

  • Analysis : The financial conditions index shows that liquidity is still loose, and the adjustment of the Fed's policy has not significantly changed the market liquidity environment. Although the stock market experienced a short-term correction on December 18, the fundamentals remain solid.

Impact on the crypto market :

  1. Liquidity support : The loose financial environment provides a basis for risky assets to rise, and Bitcoin may continue its current upward trend.
  2. Long-term impact : As expectations of a Fed rate cut increase, the liquidity environment may further improve in 2024, providing continued support for crypto assets.

2. Macroeconomic data to watch next week

Market Watch Weekly Report: Cryptocurrency market fluctuates and adjusts, and long-term benefits are expected

2. Industry Analysis

Interpretation of the impact of this week's on-chain data on BTC

Combined with this week’s on-chain data, the following analyzes the impact of these data on the BTC market from the aspects of capital flow , price indicators , and trading volume , and evaluates the key risks and opportunities in future trends.

2.1 Fund Flow

2.1.1 Stablecoin Fund Flow

Market Watch Weekly Report: Cryptocurrency market fluctuates and adjusts, and long-term benefits are expected

Market Watch Weekly Report: Cryptocurrency market fluctuates and adjusts, and long-term benefits are expected

  • Additional issuance data :
    • This week, 1.639 billion stablecoins were issued, with an average daily issuance of 234 million . Compared with the previous two weeks (5.013 billion and 3.511 billion), the issuance rate has dropped significantly and has fallen below the 255 million/day issuance rate in the main rising cycle from January to March.
    • Influence :
      • The slowdown in the issuance rate of stablecoins means that the inflow of new funds into the market has weakened significantly, which will weaken the support of BTC and the entire crypto market, especially during price adjustments.
      • Outlook : If the issuance of stablecoins continues to remain low in the future, it will limit the strength of the market rebound or lead to a deeper market correction.

2.1.2 ETF Fund Flow

Market Watch Weekly Report: Cryptocurrency market fluctuates and adjusts, and long-term benefits are expected

Market Watch Weekly Report: Cryptocurrency market fluctuates and adjusts, and long-term benefits are expected

  • Recent data trends :
    • Since early November, ETF inflows have experienced a peak (such as 3.335 billion from 11/18 to 11/22) to a recent relative low (such as 520 million from 12/9 to 12/20), indicating that the scale of ETF fund inflows has declined.
    • Influence :
      • ETF inflows are an important source of support for the BTC market, but weakening inflows reflect that institutional demand may temporarily slow due to profit-taking at high levels.
      • At BTC’s current price range ($100k+), if ETF inflows fail to recover to high levels, the market could face greater selling pressure and correction risks.

2.1.3 Premium or discount in over-the-counter transactions

Market Watch Weekly Report: Cryptocurrency market fluctuates and adjusts, and long-term benefits are expected

  • USDT and USDC OTC premium and discount trends :
    • This week, the OTC premiums of USDT and USDC remained underwater for a long time, and only briefly rebounded to above the water level on Friday.
    • Influence :
      • The decline in the OTC premium means insufficient demand for stablecoins in the OTC market, which usually reflects weak buying power in the exchange and may lead to a cooling of market sentiment.
      • The return of the premium to the surface on Friday may be an initial signal of funds flowing back into the market, but its sustainability remains to be seen.

2.2 Related price indicators

2.2.1 Cryptocurrency Market Value and BTC Market Share

Market Watch Weekly Report: Cryptocurrency market fluctuates and adjusts, and long-term benefits are expected

Market Watch Weekly Report: Cryptocurrency market fluctuates and adjusts, and long-term benefits are expected

  • Total cryptocurrency market capitalization :
    • This week, the total market value of cryptocurrencies fell from a high of 3.9 trillion to 3.5 trillion on Friday, a weekly drop of 10.25% .
    • BTC market share :
      • BTC's market share has rebounded to near the middle track of the rising channel, close to the critical pressure zone of 60% , showing strong market dominance.
  • Analysis and Impact :
    • The decline in market value and the increase in BTC’s market share indicate that market funds are flowing out of altcoins and turning to BTC. Behind BTC’s strong blood-sucking is investors’ preference for assets with higher market value during the market adjustment phase.
    • If BTC's market share breaks through the current pressure level, it will further suppress the performance of altcoins and may aggravate the structural differentiation of the market.

2.2.2 BTC overall transaction volume

Market Watch Weekly Report: Cryptocurrency market fluctuates and adjusts, and long-term benefits are expected

  • Volume Trends :
    • As BTC prices have pulled back, intraday trading volume has gradually increased this week, but compared with the trading volume during previous price pullbacks (such as December 6), this week's volume is clearly insufficient.
    • Analysis and Impact :
      • The current correction is deeper, but the trading volume is lower, indicating that the market buying power is insufficient and there is a risk of further correction.
      • If the volume cannot be effectively expanded, BTC may continue to test the support range ($98k-$100k) in the short term.

Comprehensive interpretation of data and its impact on the BTC market

  1. Fund flows are weak :
    • The issuance of stablecoins and ETF capital inflows have both slowed down, and the OTC premium has been at a discount for a long time. These all indicate that the market lacks new funds, which has weakened the support for BTC prices.
    • If this trend continues, it will limit BTC’s further upside and could trigger more profit-taking.
  2. BTC's strong market share performance :
    • Market funds are flowing out of altcoins and turning to BTC. This phenomenon strengthens BTC's status as a safe-haven asset during the adjustment period.
    • If BTC’s market share can break through the 60% pressure level, it will further promote BTC’s advantage over altcoins, but it may intensify market differentiation.
  3. Divergence between volume and price :
    • The current price correction is accompanied by insufficient volume, indicating that the market buying power is relatively weak. If the trading volume cannot be effectively expanded, the market may continue to look for lower support points.
  4. Mid-term outlook :
    • Against the backdrop of slowing capital flows and insufficient trading volumes, BTC may remain volatile in the short term or even further pull back to the key support area ($98k-$100k).
    • If the subsequent ETF fund inflows resume or the issuance of stablecoins picks up, it will bring new upward momentum to the BTC market.

Key data and indicators to watch in the future

  1. Stablecoin issuance and over-the-counter premium :
    • Whether the issuance rate of stablecoins picks up again and whether the over-the-counter premium can continue to turn positive are key signals for judging the recovery of market buying.
  2. Whether BTC market share breaks through :
    • The 60% pressure level is an important watershed for BTC’s market share. Once broken, BTC may attract more capital inflows, but it may further suppress the performance of altcoins.
  3. Recovery in ETF inflows :
    • If ETF fund inflows can return to a high level of more than 3 billion per week, it will provide stronger support for the market.
  4. Trading volume and price coordination :
    • If the BTC price can be accompanied by an increase in trading volume in the next correction, it will indicate that the market buying power has increased, which may lead to a phased rebound.

Aeolus Wheel

Combining this week's macroeconomic indicators and market data analysis, the altcoin market is experiencing continuous adjustments and capital outflow pressure. The following is an analysis of this week's altcoin market performance from multiple dimensions, including altcoin season indicators, capital flows, BTC market share, OTHERS market share, and USDT market share , and looks forward to possible future development paths.

1. Shanzhai Season Indicators

This Friday, the Shanzhai Index fell again from around 60 last week to 47. The Shanzhai Index for the whole week continued to fall after reaching a peak (88) in early December.

Market Watch Weekly Report: Cryptocurrency market fluctuates and adjusts, and long-term benefits are expected

This is reflected in the altcoins, which means that almost all altcoins have experienced a huge retracement of about 10-30% this week. We expect that the altcoin season of more than one month may need to wait for new start signals, such as Trump taking office in January next year. In the short term, BTC needs to find support and stabilize before it can have a chance to rebound.

Market Watch Weekly Report: Cryptocurrency market fluctuates and adjusts, and long-term benefits are expected

2. Inflow of copycats

Due to the large decline in the altcoin index, we verified it in the inflow and outflow volume and found that the net outflow of all currencies this week was 4.542 billion US dollars, an increase of 24% from last week. 9.319 billion US dollars have flowed out at the 30-day level. This month, the good trend of the previous month was ultimately not maintained and a large retracement occurred. The overall market was severely sucked dry by BTC.

Market Watch Weekly Report: Cryptocurrency market fluctuates and adjusts, and long-term benefits are expected

The good news is that Coinglass still shows that SOL, OP, ARB, and AVAX are in a net inflow state on the monthly line. Assuming that the data is valid, based on our long-term observations and combined with SoSo Value's track index, the Layer2 sector has been at the bottom of the performance throughout the year:

Market Watch Weekly Report: Cryptocurrency market fluctuates and adjusts, and long-term benefits are expected

Layer2 is currently on the right side. They have good resources and capital background in the industry, and most of them are still under construction. Therefore, we believe that Layer2 is suitable for next year's layout. The odds and ceiling are relatively impressive. We will also conduct relevant research on Layer2 in the future to try to find suitable targets for position building.

As for the specific capital flows and traffic of the major sectors of the Shanzhai, we have only found Coinglass, a relatively complete monitoring panel on the market, but we are still unclear about its specific calculation rules. Therefore, in terms of the Shanzhai capital flows, we may need to further study and find a methodology and data source that suits us in order to draw better observation conclusions. At the same time, we also welcome leaders, colleagues and consultants who have other data sources and methodologies to communicate with us.

3. BTC market share (ratio, growth rate)

Due to the obvious blood-sucking effect of BTC in the market, its market share fell below the support in the past few weeks and then returned to the line. It is currently within the resistance range of June 2019 and September 2020, which means that BTC's strong position has returned again. The copycat market may have to wait for some time.

Market Watch Weekly Report: Cryptocurrency market fluctuates and adjusts, and long-term benefits are expected

On the other hand, we mentioned last week that the market share trend may show a trend of returning to the line, and this is indeed the case this week. The difference is that the market share did not test the new support again, but stopped falling and rose directly on the spot, further highlighting the strong position of BTC in the market.

Market Watch Weekly Report: Cryptocurrency market fluctuates and adjusts, and long-term benefits are expected Market Watch Weekly Report: Cryptocurrency market fluctuates and adjusts, and long-term benefits are expected

BTC's market share has reached the critical end of the triangle. In the short term, we need to focus on whether this resistance will be broken. We will also continue to update and pay attention to it in the daily report, and will interpret and analyze it in a timely manner based on subsequent trends.

4.OTHERS.D

The market share of all tokens outside the TOP10 will give us a picture of the market share trend of the altcoins. Contrary to BTC.D, OTHERS.D fell significantly this week, showing an opposite trend to the market share of BTC and USDT mentioned later.

The good news is that the current resistance and support are already quite obvious, and the oscillation triangle is about to close. The subsequent trend is crucial, and we will continue to pay attention and analyze it.

Market Watch Weekly Report: Cryptocurrency market fluctuates and adjusts, and long-term benefits are expected

Moreover, according to our observation, the current trend of this round of bull market is similar to the subsequent trend of the bull market in 2018, with obvious cyclical patterns:

Market Watch Weekly Report: Cryptocurrency market fluctuates and adjusts, and long-term benefits are expected

  • Red area: decline after the bull peak
  • Blue area: first rebound after bottoming out
  • Yellow area: After rebounding, it fell again, creating market panic
  • Green area: fake bull market, bull top range

It should be noted that since 2016, we have been continuously establishing higher lows and higher highs. Therefore, we are now in the yellow area and there is a high probability that we will enter a copycat bull market in the future, and OTHERS.D will quickly rise to a higher high range (Fibonacci 1~1.618 range).

Theoretically, we should have broken through this yellow range directly in the first two weeks, but since the overall market failed to break through and fell again, we may have to test the support below again and form a higher low before breaking through again.

Market Watch Weekly Report: Cryptocurrency market fluctuates and adjusts, and long-term benefits are expected

Combined with the volume, we can clearly confirm that we are indeed in the yellow zone, so we believe that the copycat bull market may return within 1 to 3 months.

5. USDT market share

Finally, in addition to the market share of BTC and OTHERS, the market share of USDT can also reflect the strength of the altcoin market.

This week, USDT's market share has retreated to the long-term support line. Judging from the K-line and volume in recent weeks, the current bull-bear game is very intense. If the support line is further broken, the copycat market may further deteriorate.

Market Watch Weekly Report: Cryptocurrency market fluctuates and adjusts, and long-term benefits are expected

The 4-hour level shows us violent volatility, and it also jumps back and forth at the Fibonacci 0.786 level. This is because at the macro level, the support in Q1 of 22 years and March and April of this year is there, so it is difficult to break through.

Market Watch Weekly Report: Cryptocurrency market fluctuates and adjusts, and long-term benefits are expectedMarket Watch Weekly Report: Cryptocurrency market fluctuates and adjusts, and long-term benefits are expected