Jessy, Golden Finance

Since December 8, the crypto market has fallen for three consecutive days, and the overall market value has dropped from the peak of US$3.7 trillion on December 8. US$3.45 trillion as of December 10. In the ongoing rising market, what factors have led to the decline in the past few days?

News level:

Google quantum chip progress: In the early morning of December 10th, Beijing time, Google launched the latest quantum chip "Willow" and claimed that A major achievement, there are concerns that the chip may pose a threat to the security of cryptocurrencies: Cryptocurrencies such as Bitcoin are mined by calculating complex mathematical puzzles to confirm transactions and record them on the blockchain, and mining computing power needs and the “miners” in the network It is related to quantity and computing power level. . Google's quantum chip "willow" has super computing power and completed a "standard benchmark calculation" in less than five minutes that would take today's fastest computers at least 10 to the power of 25 years to complete. If it is applied For mining, it will greatly improve mining efficiency, making it difficult for traditional mining machines to compete in terms of cost and efficiency; on the other hand, the security of cryptocurrency depends on mathematical problems in cryptography, such as elliptic curve encryption and RSA encryption, etc., these algorithms are based on the assumption that current computing power cannot be cracked in a reasonable time. Quantum computers can run quantum algorithms such as Shor's algorithm, which is specifically used to crack encryption technology based on large number decomposition. Once quantum chip technology develops to a mature enough stage, its powerful computing power may cause the existing cryptocurrency encryption system to be Cracked, causing the user's private key to be leaked. Taken together, these factors affected investor confidence and led to a market decline. .

Citron Research shorted MicroStrategy stock: Large-scale purchases of Bitcoin by large institutions such as MicroStrategy have driven the rise in Bitcoin prices to a certain extent, but have also aroused market attention and concern. Citron Research, a well-known institution, once pointed out that MicroStrategy was "overheated" and shorted it. As a result, MicroStrategy's stock fell 20% in one day. MicroStrategy stock was once called a shadow Bitcoin. Institutions' short-selling behavior of MicroStrategy stock was also to a certain extent. has impacted crypto market sentiment.

Microsoft will not invest in Bitcoin for the time being: Microsoft’s major shareholders opposed the company’s Bitcoin investment proposal on December 10, local time. Microsoft's board of directors had earlier urged shareholders to reject a recommendation from the National Center for Public Policy Research that the company invest 1% of its total assets in Bitcoin as a hedge against inflation.

Market:

Long-term investors take profits:

Recently, some KOLs and institutions have continued to sell. For example, on December 4, it was reported that Meitu sold the Bitcoin and Ethereum they had accumulated previously, cashing out a total of approximately US$180 million. These long-term holders accumulated huge profits during the early market rise. As the market showed signs of adjustment, they chose to take profits. The emergence of a large number of sell orders further aggravated the market turmoil, causing prices to fall sharply.

Market sentiment is overheated, and trading volume has declined in the past two days: According to Coinglass data, both contract and spot trading volumes reached their recent peaks on December 8th and 9th, and on the 10th and 11th, The overall trading volume of the cryptocurrency market has declined to a certain extent.

Similarly, on the 8th and 9th, the market sentiment was hot, and long contract positions reached a record high. However, when the market fell as a whole, on the 9th, Within 24 hours on the 10th, the liquidation volume hit a new high in this bull market, reaching US$1.712 billion, of which US$1.55 billion was liquidated for long orders and US$162 million was liquidated for short orders. This also shows that the market sentiment is overheated, there are too many people doing long, the market has entered a correction, and clearing some leverage can also make the market outlook more healthy and sustainable.

Macroeconomic level:

U.S. CPI data will be released: The United States will release U.S. CPI data for November at 8:30 am local time on December 11. Before the data is released, Turmoil in the crypto market is normal. Because CPI is an important indicator of inflation, and the United States will determine the extent of interest rate cuts in December based on inflation. The amount of interest rate cuts and the extent of waterproofing will affect people's preferences for risky assets.

The U.S. dollar has strengthened: Recently, the U.S. dollar has strengthened. On December 9 and 10, the U.S. dollar index closed at 106.11 and 106.1926 respectively, up 0.09% and 0.08% from the previous trading day. The strength of the U.S. dollar is often seen as a signal of the relative strength of the U.S. economy, and it may also hint at certain uncertainties in the global economy. In this case, investors' risk appetite will generally decrease.

At the same time, the strength of the U.S. dollar has increased the attractiveness of U.S. dollar assets. The yields on risk-free assets such as U.S. Treasury bonds have increased. Investors, in pursuit of higher returns and asset security, will divert funds from cryptocurrencies. Risky assets such as currencies move into USD assets, thereby putting downward pressure on cryptocurrency prices.