Is the Meme money craze a speculative bubble?

 

Coingecko data show that as of 5 a.m. on October 28, bitcoin's 24h lowest price was around $58000, which was the first sharp decline after bitcoin hit a record high of $67000 on October 20, with a maximum decline of 13% on the 7th.

The good news of the approval of bitcoin futures ETF by the United States has been digested in a week. The ETF has been brewing from the news to its official listing, which is the cycle of bitcoin from US $56000 to US $60000. Combined with market data, the decline of bitcoin suggests that some investors have taken profits.

The market is indeed moving towards greed in the short term. One indicator is the over leverage of the bitcoin market. According to cryptoquant, the data website, when bitcoin moved to a new high in this round of prices, the estimated leverage ratio of all exchanges was 0.175, which was close to the historical secondary high in April. At that time, the leverage ratio continued to rise, once exceeding 0.18, and then bitcoin entered the downward channel. This time, when bitcoin fell 13%, the leverage ratio had reached 0.19.

Excessive leverage implies that the market tends to be greedy, which also shows that the market does not have the expected large amount of funds to support the price to continue to rise. Another manifestation of greed is the rise in the concentration of speculative sentiment. The meme coins loved by retail investors represent the sharp rise of Shib against the trend, just like the index of speculative market, which inevitably reminds people of the flying scene of meme coins before the last market crash.

High leverage blocks the uplink space of bitcoin

On October 27, bitcoin, the largest market value in the encrypted asset market, fell to $58100, close to its lowest level since October 15. It has fallen 13% since hitting an all-time high of $67016 on October 20.

Tony sycamore, an analyst at the Australian investment platform city index, attributed the loss of bitcoin to "traders' profits from the recent rebound". In addition, coindesk analyst Omkar observed that in the bitcoin futures market, the leveraged fund of the Chicago Mercantile Exchange (CME) raised its bets on bitcoin to an all-time high in the week ending October 19, which may be to profit from the widening gap between futures and spot market prices.

Indeed, from a low of $43000 in early October to $58000 today, BTC's monthly increase has been close to 35%. Glassnode's recent data on the chain shows that in mid September, there was a large amount of accumulation on the chain during the fall of bitcoin price. Some analysts believe that it is not surprising that some people sell from it under the stimulation of breaking a new high and a 35% increase.

In terms of the investment law of buying low and selling high, the decline when bitcoin peaked is also very common. In the process of this round of rapid decline of more than 13%, the role and impact of "deleveraging" seem to be amplified, because the current bitcoin leverage ratio is approaching a new high in the year, and the market shows the performance of over leverage.

According to cryptoquant, as of October 26, the estimated leverage index of bitcoin in all exchanges had reached 0.190, close to the highest level in November last year (0.195).

The calculation method of "estimated leverage ratio" is to divide the futures open positions of all exchanges by the bitcoin reserves of the exchanges. Among them, the number of open positions is the number of contracts that have not been cleared at the end of a trading cycle, which is the most important indicator of liquidity; Since July, the bitcoin reserves of the exchange have continued to decline. This ratio essentially shows the leverage of ordinary investors.

From the historical bitcoin estimated leverage ratio, when the price rises to a certain stage, when the leverage ratio is too high, it often means that the price peaks. Cryptoquant's historical data show that when bitcoin moved towards the current round of price high of $67000, the estimated leverage ratio was 0.175, which was close to the historical secondary high in April. At that time, the leverage ratio continued to rise, once exceeding 0.18, and then bitcoin entered the downlink channel. This time, when bitcoin fell 13%, the leverage ratio had reached 0.19.

Ki young Ju, CEO of cryptoquant, also said in an interview with coindesk that now the market is obviously over leveraged. "We will soon see some fluctuations and a lot of liquidation."

In the general sense of financial market, leverage ratio generally refers to the ratio of total assets to equity capital in the balance sheet. High leverage ratio means that financial assets can obtain a higher return on equity under the stimulation of liquidity brought by leverage in the stage of economic prosperity; However, when the market reverses, there will be insufficient liquidity and excessive leverage, which will face the risk of significant decline in earnings.

In this general sense, the current round of bitcoin rise does not rule out the impact of high leverage, which may imply that the amount of funds supporting the rise itself is not as large as expected and the upward space is limited.

Speculative overheating "Shib led meme plate"

From the evening of October 27, in sharp contrast to the decline of bitcoin, the rise of meme coin plate, of which Shiba Inu's ecological pass Shib is the most.

When bitcoin plummeted to around us $58000, Shib set a record of US $0.000088 since its issuance for more than a year, with a maximum increase of 60% in 24 hours. The encrypted asset has continuously broken through the previous high since the weekend. The total market value of US $37 billion has surpassed Doge, the earliest asset in meme, and squeezed into the top 10 of the list of encrypted asset market value, ranking ninth.