【MICA RESEARCH】BTC once broke through $100,000, what should we pay attention to in the future?

The cryptocurrency market has benefited from multiple regulatory policies and the appointment of new SEC Chairman Paul Atkins. The price of BTC once surpassed $100,000 by absorbing funds from competing coins, but later fell back to $98,000 as investors took profits. In terms of weekly returns, competing coins such as XRP, BNB, ADA, and TRX have all seen excess gains of over 10% to 30%.

As mentioned in our report last week, competing coins have benefited from the overflow of BTC funds, causing a large amount of crypto world funds to flow from BTC into competing coins. The main driving force is that fund companies have started actively applying for encryption Token ETFs, attempting to break through regulatory restrictions beyond BTC and Ether Spot ETFs. In addition, the new SEC chairman, Paul Atkins, is himself the founder of an encryption digital asset company and also one of the founders of Token Alliance, naturally being more friendly towards encryption Tokens.

Based on this political background, encryption Token Spot ETF naturally becomes an excellent target for capital inflows, but the rise speed may be too fast, for example, XRP rose by more than 30% in a day, and other AVAX and LINK also rose due to the optimistic outlook for future Token economy. There may be follow-up pump potential for future Decentralized Finance related concept Tokens, investors can follow more.

It is worth noting that TRX has also become a target for speculative capital. The weekly increase has exceeded 50%, and the capital sentiment is very crazy. This is generally believed to be influenced by the martial law in South Korea. Currently, TRX is a relatively common channel for transferring USDT in South Korea, but it is still involved in several specific capital speculations. Because the lifting of martial law in South Korea a few hours later did not cause TRX to fall back to its original price, so the fundamentals are not so informative.

After a large influx of funds into altcoins, due to excessive increases, funds have also been transferred to BTC after profit from altcoins, retail investors and institutions have begun to buy BTC, pushing the price of BTC once exceeded $100,000, followed by BTC's profit-taking tide, and finally the price also rolled back, forming the current consolidation situation, we next try to scrutinize the follow-up encryption market trend.

Sources: MICA RESEARCH

A. On December 3rd, XRP Spot ETF topic is fermenting, analysts are optimistic

The expectation for relaxed regulation on the cryptocurrency industry under Trump's administration has driven the price of Ripple (XRP), considered to be the next candidate for Spot ETF among competing coins, to soar significantly after Trump's victory. It surged by 297% in November alone, reaching the highest monthly Return on Investment (ROI) since December 2017, closing at $2.7, marking a 7-year high and breaking the high point of 2021.

Yesterday, XRP rose by over 20% again. Analyst Jacob Canfield predicts that its price could double to $6.60, considering this a reasonable target. Meanwhile, another analyst Tony Edward set a range of $5 to $8. The recent surge in XRP has attracted more new retail investors, driving up XRP market capitalization to become the third largest cryptocurrency.

In the on-chain activity, large and small investors have accumulated $1.6 billion worth of XRP within 3 weeks, reaching a new high in holdings. In addition, the number of Wallet Addresses with funds for XRP has surpassed 5.5 million for the first time, indicating a significant rise in market interest; both XRP Spot and contract volumes have risen simultaneously, indicating a surge in market demand for XRP. Currently, the market sentiment towards XRP is bullish, with both technical and fundamental support for further price increase, and the benefits of capital spillover are beginning to emerge.

B. On December 4th, CryptoQuant CEO believes that the future rewards of competitive coins may not be as expected.

With the cryptocurrency market entering a new bull run, funds have also flowed out of BTC into other competitive coins. However, CryptoQuant CEO Ki Young Ju believes that the clear trend of funds flowing from BTC to altcoins is no longer visible. In the end, many altcoins may fall due to a lack of new capital inflows. He pointed out that this altseason will be different from the past, and only a few assets can achieve significant returns.

Even though the market sentiment is quite positive, the lack of new funds entering the altcoin market may limit the rise in prices of most altcoins. He believes that BTC is gradually separating from the crypto ecosystem and shifting towards a development model based on ETFs and stocks at the paper level (Layer-2), where the price fluctuation of BTC becomes more apparent with the inflow of traditional institutional funds such as ETFs. This makes it difficult for funds to flow effectively from BTC to altcoins.

However, the rise of altcoins is more driven by stable coins and Fiat Currency trading pairs, rather than the correlation with BTC. Unlike BTC, which can directly obtain capital inflows from the traditional financial market, the current competing coins are still trapped in the relatively small encryption market and cannot obtain significant capital inflows. This also reflects the structural changes in the current market model. However, the top 20 competing coins have still shown good returns recently, confirming the competitive coin season we mentioned earlier. However, it cannot be denied that this spillover effect of capital may weaken in the future.

C. On December 5th, Trump appointed Paul Atkins as the new SEC chairman, pumpcoin market rise

The newly elected President of the United States, Trump, officially nominated Paul Atkins to succeed Gary Gensler as Chairman of the U.S. Securities and Exchange Commission (SEC). Paul Atkins, who has previously served as an SEC commissioner, has actively promoted transparency and investor protection. It is worth noting that Paul Atkins is a pro-encryption advocate and has been focusing on digital assets since 2017.

He founded the digital asset company Patomak Global Partners and served as CEO. He also served as co-chairman of the digital commerce association 'Token Alliance'. Trump's nomination is one of his campaign promises to cryptocurrency voters and has become an important topic at the BTC 2024 conference.

After Gary Gensler's resignation, the encryption market has risen. Analysts predict that the rise of altcoins and competing coins may continue until 2025. Several companies such as Bitwise and VanEck have quickly submitted applications for ETFs related to Solana, XRP, and others. The industry is hopeful that the new leadership at the SEC will quell legal actions against encryption companies. According to statistics from the Blockchain Association, the SEC filed 104 lawsuits against the encryption industry during Gary Gensler's tenure, resulting in a legal cost burden of up to $426 million.

US GDP data will be the biggest risk possibility

Due to the rapid rise in the crypto market, the market has experienced two rounds of capital rotation, which is not very healthy. The market is currently ignoring the overall economic risks, especially the risks of a US economic recession or deterioration in the job market. Current investors assume that the US economy will improve after Trump takes office, especially in terms of deregulation, tax cuts, and tariffs, which will all keep the US economy on its current track.

According to the non-farm payroll data released on Friday, the number of non-farm payroll jobs added in the United States in November was 227,000, higher than the original expectation of 200,000, indicating a strong rebound in the job market after being affected by hurricanes and the Boeing strike. At the same time, the employment data for the past two months have been revised upward. The main job gains came from the healthcare, leisure services, government, and social assistance industries, while the retail industry saw a decline. Average hourly wages rose by 0.4% per month, significantly higher than market expectations, indicating that wage growth remains resilient.

However, due to the decrease in the labor participation rate, the unemployment rate rebounded from 4.1% to 4.2%, which has brought some concerns to the market about the decline in the labor market. The US dollar index also followed suit in decline, and institutions may subsequently introduce more 'US recession' themes to scare off risk asset holders.

Currently, employment data has become an important reference for the Fed's December interest rate decision. Although the market's expectation of a 70% rate cut in December is high, some officials, including Chairman Powell, have expressed caution and may choose to postpone further rate cuts. Analysts believe that the strength of the employment market's recovery will affect the trend of the US dollar.

If the US job market continues to rise strongly, the US dollar may further appreciate, boosting investor confidence; if it performs poorly, it may trigger a pullback. In the long run, most institutions dare not be pessimistic about the US economy, and it is safer to align with the opinions of the majority. Most expect the US dollar to continue to strengthen in the first half of 2025, but our view on the US economy is more conservative.

Will the US economy continue to do well? The previous momentum of employment support in the US mainly came from the tourism industry and government employment opportunities. First, let's talk about the tourism industry. We observe that the retaliatory travel boom after the current epidemic has come to an end. The US tourism industry will also enter the off-season with the coming of winter. Consumers will return home for Thanksgiving and Christmas, and their spending will shift from travel to buying gifts. Therefore, the support for the tourism industry will also weaken accordingly.

The second point is that under the premise of Trump's confirmation, the Biden administration does not need to continue to maintain a loose employment rate, and can completely let the economy develop freely. Therefore, the government's supported employment data is unlikely to continue to perform well. From this perspective, the benefits that originally maintained the employment market will disappear, and the possibility of subsequent employment data exceeding expectations is not high. The US economic recession is currently the biggest risk factor in the crypto market, and investors are advised to remain calm in the current overheated market.

Last week, reviewing [MICA RESEARCH], the BTC rally paused, and funds flowed into competing coins.

Statement: The article represents only the author's personal opinion and does not represent the objective point of view and position of Block. All content and opinions are for reference only and do not constitute investment advice. Investors should make their own decisions and trades, and the author and Block will not be responsible for any direct or indirect losses incurred by investors in their transactions.

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〈【MICA RESEARCH】BTC once broke through $100,000, what should we pay attention to in the future? 〉This article was first published in Blockcast.