On-chain data analysis on October 23, 2023: U.S. stocks plummeted, gold and bits

On October 23, 2023, HotsCoin’s new currency was launched on LIDO DAO (LDO). The deposit function and transaction function are currently open, and the withdrawal function will be opened at 16:00 on October 24, 2023 (UTC+8). In addition, today's HotsCoin gainer list as of 17:00 (UTC+8): TRB rose 15.22%; FTM rose 11.79%; AAVE rose 10.97%.

There has been a significant polarization in recent macroeconomic game theory. US Treasury bonds and gold have surged, the US stock Nasdaq has dropped, and Bitcoin, after a period of stagnation, ignited a rally fueled by false information passed through the spot ETF. The ongoing conflict in the Middle East has gradually highlighted a certain level of haven attribute. Federal Reserve officials are gradually unified in their stance to temporarily halt interest rate hikes in November or even December. However, most of them state that they will maintain a relatively long period of high-interest rates, and even consider rate cuts by the end of 2024. Maintaining a high-interest rate transition period for 6-12 months is quite terrifying (sustaining high-interest rates poses a high risk of insolvency for financial institutions, banks, and some lending companies). US stocks have begun to show signs of a pullback. Leaving aside the macro-market game, the cryptocurrency market has seen an epic game point of $31,000 in the short term. Bitcoin is currently stimulating sentiment with the false information about the spot ETF. It has made up for the previous gains of the US stock Nasdaq and the haven attribute of the Middle East conflict. However, the current stage faces the challenge of whether the interim high point has enough financial support to achieve comprehensive profit chips. If the subsequent favorable factors cannot materialize, it will face significant pullback and hidden risk. Let's take a look at the dynamic on-chain data and changes in investor sentiment.

First, let's look at the net flow of exchanges. It's obvious that there was a significant net outflow before the second round of Bitcoin price increases. Generally, net outflows are considered a behavior of holding coins for the long term, and there hasn't been a significant net inflow after the subsequent price increase. Based on the data above, there is a certain bullish sentiment in the market. However, as it has recently exceeded the 30,000 USD mark, the game is also more intense, and the overall net flow is relatively balanced.

Let's look at the data for unrealized contract open interest. When the price of Bitcoin was $30,000 in early August, the open interest was around $10 billion. But after dropping to $26,000 in mid-August, the open interest dropped sharply by 30% to $7 billion. After nearly two months of volatility and recovery, it has once again reached $30,000, and the open interest has also recovered to over $9 billion. It's still 10% or $1 billion short of the $10 billion open interest level from before, indicating that while market sentiment has significantly improved, there are still fewer users entering the market compared to before. To break through the $31,000 interim point, more funds and subsequent positive news support are still needed, otherwise, it will remain difficult.

In conclusion:
The cryptocurrency market is mainly linked to the US stock Nasdaq and the financial market during the low liquidity period. It can only break out with a great improvement in cryptocurrency liquidity or a strong positive catalyst. At the moment, the two main sources of support for the cryptocurrency market are the increase in demand due to geopolitical factors and the potential approval of a Bitcoin spot ETF. The latter may have been stimulated by false information, leading to a rapid and substantial increase in the price. Therefore, some institutions and whales have increased their Bitcoin holdings, as evidenced by the behavior of hoarding coins before the previous price increase. However, the actual approval of a spot ETF is unlikely to happen so quickly, as there are significant adjustments involving interests, collaborative departments, and even regulatory legislative games, not to mention the change in the SEC chairman. Thus, the likelihood of immediate approval is low (of course, a slight possibility is not ruled out). When considering cryptocurrency investments, cost-effectiveness and risk-reward are key factors to weigh. Currently, both long and short parties are in constant competition. Internal institutions considering profit-taking are considering reducing positions for hedging, while external institutions waiting for policies are considering deploying their bottom positions to prevent being left behind. The approval of a spot ETF will attract more funds into the market. However, if there is no follow-up narrative and positive news, subsequent funds are unlikely to enter as significantly as imagined, especially since the positive news has not yet materialized. Therefore, the cryptocurrency market still faces a significant risk of a pullback. The most immediate game will be determined by the release of positive and negative news. Many potential hidden risks exist, but the clear positive ones are ahead of the game. I did not participate in the October market, holding only a 10% bottom position in spot trading, and I am still in a wait-and-see mode. I would consider entering the market with a 50% position if the spot ETF is approved, otherwise, I would wait for Bitcoin to consolidate around $18,000-$20,000 and build positions gradually. (The above information is for reference only and does not constitute any investment advice).