EMC Labs August Briefing: The ascending channel is broken, and there are two worlds on and off the chain

The report mentions market, project, currency and other information, opinions and judgments, which are for reference only and do not constitute any investment advice.

Macromarket

The hesitation of the market in July was fully expressed in August.

The hawkish voice of the Federal Reserve, monetary tightening in a high interest rate environment and concerns about corporate recession have made various market participants more cautious.

Although it closed down only 2% in the last month, the Nasdaq, which ended its five-game winning streak, once fell by more than 8% in August. It is not known whether the Nasdaq will start a downward trend in the future, and the hesitation has cast a veil of uncertainty on the global financial market.

Nasdaq monthly trend

The situation in the crypto asset market in August was even more severe.

The balance line of 29,000 was completely lost, and both bulls and bears re-established the balance line at $26,000.

BTC monthly trend

The reappearance of the "painting door" market in August shows that the market is in a state of sluggishness and sluggish trading, and the trend certainty is lost, the volatility has dropped to the third lowest in history, and the pricing power is dominated by rumors and emotions.

On-chain data shows that the divergence between long hands and short hands is increasing. Long-term players are still continuing to absorb liquidity, but 88% of short-term positions are at a loss. They continue to sell under the stimulation of various news. On the one hand, they price the market downwards, and on the other hand, they continue to promote the great cause of clearing liquidity during the repair period. .

Crypto Market Trends

In August, BTC opened at $29,232 and closed at $25,655, surpassing the drop forecast set by EMC Labs in the July briefing — $28,000, again near the June low. It fell 11.26% for the whole month, recording the largest daily and monthly decline since the rebound at the beginning of the year. As the plunge occurred, trading volume also increased slightly.

BTC daily trend

The lower edge of the ascending channel line was broken on August 16, and the 7% plunge the next day was triggered by rumors of Space X selling BTC. This plunge not only heralds the complete end of the upward trend since the beginning of the year (the third wave of rebound during the recovery period), but also completely eliminates the market effect brought about by the asset management giant BlackRock’s BTC spot ETF application.

The lack of new capital has led to rumors and sentiment becoming the dominant factors in the market. So has the core agenda of the restoration period been affected?

Long and short game

We once again turn our attention to the size of long and short positions to judge the validity of the cycle stage of the market.

Position size of market parties

In August, long-term holdings increased from 14.56 million coins at the end of July to 14.71 million coins, a net increase of 150,000 coins.

Short-term holdings decreased from 2.61 million coins at the end of July to 2.52 million coins, a net decrease of 90,000 coins.

The balance of the exchange decreased by 30,000 coins, leaving 2.26 million coins.

The increase in long-term positions in July was 96,000, far lower than the 150,000 this month. In other words, as the price of BTC plummeted, the long-handed camp strengthened its belief in increasing holdings in August, rather than weakening it.

The scale of the reduction of weak hands has increased from 20,000 in July to 90,000, indicating that price fluctuations are still the most important factor driving weak hands transactions, and the rate of rise and fall determines the scale of its increase or decrease. The scale of exchange outflows in August decreased by 10,000 coins from 40,000 in July, indicating that the increase in long-term holdings mainly came from the reduction of short-term holdings.

Comprehensive data shows that the market is still operating intact during the recovery period. Long-term investors continue to increase their holdings, while short-term investors continue to reduce their holdings. The position trends of the two have not changed. Market liquidity continues to be absorbed, which means that on-chain data still supports the upward trend of BTC prices in the medium to long term.

Supply Trends

As of the end of August, the market's overall floating profit situation has deteriorated sharply, falling from 43% to 28%. The long-term floating profit dropped from 44% to 27%, while the short-hand dropped from 3% floating profit to 8% floating loss.

Market supply pressure

We further drill down into selling insights and examine profits and losses when long and short hands sell BTC.

Profit and loss status of selling BTC

The market decline and panic drove the price down sharply. In this process, BTC selling was both the cause and the result of the decline.

Changshou's after-sales profit reached a maximum of 56% in a single day and a minimum of -29%. It remained profitable throughout the month, but the profit margin dropped compared with July.

The short-term after-sales profit in a single day is as high as 0.5% and as low as -3%, and it maintains a loss throughout the month.

The sales volume of long and short lots is maintained at about 1:10, and short lots control the pricing power with absolute scale advantages.

"Supply Chrysostom" has converged but is still open. The overall market supply situation of floating profit and floating loss is still within the trend of the recovery period.

The profit and loss of BTC in the whole market

Whale Sell

In the July briefing, we analyzed that apart from the perspective of long and short hands, from the perspective of currency holding scale, the whale group (entities holding more than 1,000 coins) dominated the adjustment in July. In August, this trend continued, and giant whale groups were still selling heavily, but the scale was smaller than in July.

The scale of giant whales transferring in and out of the exchange

The selling of short-handed giant whales continued, and it remained at about 50,000 pieces per day until the end of the month. Although it has dropped sharply from the highest of 140,000 in July, considering that the daily net inflow of the exchange is around 30,000, this selling scale can still have a decisive impact on the price trend.

From a long-term perspective, the total number of coins held by the giant whale group reached a historic high of 6,237,357 coins on May 26. Since then, it has continued to reduce its holdings to 5,875,150 coins at the end of August, a total reduction of 360,000 coins.

EMC Labs believes that the market pressure at this end of the time mainly comes from the large-scale selling of the short-handed giant whale group. Now this selling trend has weakened but has not stopped.

On-chain activities

Back to the foundation of long-term market support - on-chain activities.

BTC daily new addresses

Compared with July, the number of new addresses has declined, especially during the price flash crash period, but the overall trend remains within the mid-term upward channel, and the number of new addresses on weekends has also been rising steadily. The continuous expansion of new addresses shows the gradual accumulation of growth forces in the repair period.

In terms of address activity, Mempool Transactions only saw a sharp decline in the first half of August, and then gradually recovered and hit the highest point since January in the rebound during the week of August 29. Considering the Ordinals minting frenzy that preceded it in May, this high point is very encouraging.

Mempool Transactions daily queue size

Incremental Funds

Incremental funding is still very pessimistic. Capital outflows since the Great Clearance are still continuing, with net outflows of stablecoins reaching US$1.4 billion in August, the same as in July. We believe that the reason for this continuous outflow of funds must be found externally, that is, the macro-financial market.

Major Stablecoin Supply

Relatively optimistic data appeared in terms of CEX stock stable coins. The overall outflow situation in August has been greatly improved, and even a net inflow occurred in a small amount of time. This shows that at the $26,000 level, the market's overall willingness to sell is already very low.

Net inflow/outflow of stablecoins in centralized exchanges

Conclusion

The market in August is as boring as July. Funds are in a state of outflow as a whole, with USD 1.4 billion outflowed from the entire market throughout the month, and all parties in the market have adjusted their positions under the new pressure environment. Long-handed stocks are accumulating chips as always, while short-handed stocks, especially short-handed giant whales, continue to sell, but the scale of selling is shrinking. The overall supply is still within the recovery period indicators, showing that the long-term will and the power of the cycle are still in control of the long-term market trend.

What is commendable is still the repair and growth of on-chain data, the new addresses continue to grow, and the Mempool Transactions data even hit a new high this month since the rebound in January.

In the July briefing, EMC Labs pointed out that - "The biggest risk should be whether the macro-financial market can withstand the high interest rate environment of the US dollar." The market performance in August just confirmed this point. The Fed’s tone is still tough, the Nasdaq ended its 5-game winning streak, and BTC found support at the $26,000 line after a sharp drop.

After breaking away from the support of the rising track, BTC has fallen to the lower edge of the 25,000-31,000 box, and then it will test $20,000, which is the bottom of the last round of bull market.

EMC Labs believes that this decline during the recovery period is an ultra-low probability event. If it happens, the driving force will still come from the macro-financial market, such as another interest rate hike, financial market collapse, and economic recession.

The active state of the data on the chain shows that the possibility of a rapid and substantial rebound of BTC in the short to medium term still exists, and the probability is not low.

EMC Labs (Emergence Labs) was founded in April 2023 by crypto asset investors and data mining engineers. Focusing on blockchain industry research and Crypto secondary market investment, with industry foresight, insight and data mining as its core competitiveness, it is committed to participating in the booming blockchain industry through research and investment, and promoting blockchain and encrypted assets Human beings bring well-being.

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