On February 3rd, the cryptocurrency market attempted to find a bottom following a turbulent weekend; although Bitcoin rebounded approximately 7% from its lows, it still encountered significant overhead resistance during the US trading session. ZFX Shanhai Securities believes this feeble rebound is unlikely to reverse the overall short-term bearish trend for the time being. While Bitcoin has now recovered to around $79,000, successfully moving away from the weekend low of $75,000, the substantial cumulative losses over the past week remain high, indicating that a full restoration of market confidence will require more time.
Cascading liquidations in the leveraged market were the core factor behind the recent surge in volatility. ZFX Shanhai Securities indicated that over $2 billion in crypto derivatives were forcibly liquidated within a short period; this technical sell-off, rather than a change in fundamentals, exposed the current fragility of market liquidity. According to relevant market observations, the accelerated liquidation of perpetual contracts intensified the downward momentum, as opposed to active spot selling, suggesting the market is still in a digestion phase of deleveraging. This also explains why weekly declines for major assets like Ethereum approached 20%.
In contrast, the traditional financial sector presented a starkly different picture compared to the crypto market. The Dow Jones Industrial Average recorded its ninth consecutive monthly gain, setting a historic streak of advances, while the January ISM Manufacturing PMI unexpectedly rose to 52.6, indicating a return to expansion for the manufacturing sector after a year. ZFX Shanhai Securities posits that this robust economic fundamental backdrop is attracting substantial capital back to mainstream financial assets, leading to underperformance for crypto-related stocks like Coinbase and MicroStrategy on Monday, with declines ranging from 3% to 9%.
Looking ahead at the broader macroeconomic environment in early February, all market attention is focused on the upcoming release of the January non-farm payrolls report. With the Federal Reserve holding interest rates steady, the strength of the labor market will directly influence whether the Fed will restart its rate-cutting path. For cryptocurrencies, in the absence of new fundamental catalysts, the market will likely continue to oscillate within a range of $78,000 to $82,000. ZFX Shanhai Securities advises investors to remain vigilant against the risk of technical support levels being breached again, which could potentially trigger a new wave of derivative selling.
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