EMC Labs March report: Bull Market continues after big sell-off

Author: 0xWeilan, EMC Labs

The global financial markets remained calm in March.

The Nasdaq and Dow Jones indices both hit new highs Rebound without suspense. At this point, the Nasdaq has been pumping for 5 consecutive months, indicating that Long capital is constantly increasing its tolerance for the delay in US interest rate cuts.

There are many factors that have led to the delay in interest rate cuts.

US CPI rebounded slightly from 3.1% to 3.2% on a month-on-month basis, and the US manufacturing index PMI rebounded to 50.3%, showing signs of entering an expansionary period. Japan raised interest rates for the first time after ending an eight-year era of negative interest rates.

The probability of a rate cut in April in the United States has fallen significantly, and the probability of a rate cut in May has also fallen to below 50%.

US Treasury Interest Scale (US Bank Mapping)

The accumulation of capital returning to the United States simultaneously boosts equity and safe-haven markets.

The United States cut interest rates, and the macro financial system entered a loose period, and the equity market and encryption market entered a new round of pump cycle.

Starting with long positions and ending with short positions. Maintain a dynamic balance between the two.

During the uptrend, when new inflows of capital control the pricing power, the dominant buying volume drives the price to pump and achieve balance.

During the uptrend, when BTC sells the long palm control pricing rights, the main selling volume pushes the price down to achieve balance.

There is also an important sub-segment of participants - short-term profit makers, who can become an important reason for pushing prices down in the rising period.

Observing the March shorting, we found that long and short positions were shorting at the same frequency.

On February 26, both started a large-scale coin transfer to the exchange to initiate a major dumping, reaching a peak of transfers on March 12, and the scale of transfers has been continuously declining since then.

On March 12, both reached a peak in scale, and the next day the BTC price started to fall from a high of $73835.57, falling to a low of $60771.14 on March 20.

After March 20, bullish traders used buying power to pull the BTC price back to $71288.90, but selling pressure continued to pour in after 3.20, and the price collapsed again in the first two trading days of April.

Short-handed group cashing out profits

On March 12, the joint launch of the long and short hands triggered the first large-scale dumping and profit-locking peak by the two groups after entering the Bull Market, with a total profit of up to 3 billion on that day. From February 26 to March 31, the total profit reached as high as 63.1 billion US dollars.

It is worth noting that -

During the first half of the major dumping from February 26th to March 12th, BTC was in a phase dominated by buying power, and the price rose from $51,730.96 to $71,475.93.

During the second half of the major dumping from March 13th to March 31st (which is not yet over), BTC is in a phase dominated by selling pressure, and the price has fallen from a high of 73709.99 to 60771.74 US dollars.

Although the peak selling occurred on March 12th, the short-selling volume remained over 1 billion US dollars until the end of the month.

Solana daily new Address

Solana active user Address

Solana, a heterogeneous Ethereum, is considered the new carrier of DePin and also the support public chain for USDC payment narrative.

However, we must see that these adoptions are far from fully deployed. Currently, the main use cases of the Solana network are issuance and speculation of MEME coins. Phenomenal MEME coins such as Bonk, BOME, WIF, etc. have successively appeared, with daily volume reaching billions of dollars. A large number of short-lived MEME coins complete their lives within a week, but speculators are still enthusiastic, resulting in over 1,000 new MEME coins born daily.

Although Solana is making remarkable innovations in areas such as DePin, DEX, Staking, Oracle, RWA, etc., the current widespread adoption of Solana is still speculative like the Ethereum ICO frenzy in 2017.

This is worrisome. In previous reports, EMC Labs has repeatedly pointed out that the trend of stablecoin inflows changing from outflows to inflows in October 2023 is cyclical. This trend is a major external factor for the start of the bull run, and it will not end in the short term due to its cyclical nature. Throughout March, a total of $8.9 billion flowed into the stablecoin channel, setting a monthly inflow record for this cycle. This inflow is a basic support for the historical record price of BTC this month, and it is also one of the recipients of selling BTC. The circulation scale of stablecoins has not yet reached the peak of the last bull run, and the scale and speed of subsequent inflows need to be closely followed. Since the approval of 11 BTC ETFs in the United States in January this year, the funds in this channel have also become one of the important factors affecting the market. Observing the data, it can be seen that BTC ETFs did not experience large-scale outflows in this round of major selling adjustments, only recording small outflows from March 18 to March 22.

11 BTC ETF inflow and outflow statistics (SosoValue) Based on the analysis of the inflow and outflow of BTC ETF, we conclude that the funds in this channel only made a reduce position adjustment in a short period of time, with a scale of around 10 US dollars. This fund size is relatively small compared to the locked profits of up to 63.1 billion US dollars, so it is not the fundamental reason for this round of adjustment. The funds in the BTC ETF channel are still flowing in continuously, which is one of the important supports for the subsequent recovery of BTC price and the creation of new highs. The rise in the supply of funds is the direct cause of pushing the price up, and the continuous rise in the supply of funds is the direct cause of launching the Bull Market.

Conclusion

In this report, we analyzed the first round of large-scale dumping by long-term investors and short-term profiteers at the beginning of a new cycle after the BTC price broke through a new high.

This round of dumping has helped sellers lock in profits of $61 billion, leading to a 17% drop in BTC price.

Based on market structure, we believe that this sell-off is a normal phenomenon during the market's upward phase; based on the inflow of funds from stablecoins and ETF channels, as well as the adoption of application chains, we believe that there will still be fluctuations in the future. However, this round of crypto bull market is unfolding in an orderly manner, and for long-term investors, they should actively go long with caution as the foundation.