6 Cyclical Events That Impact Crypto Market Rise and Fall

The crypto market is a sensitive and complex system, where any market movement is the result of multiple factors working together. Therefore, timely grasp of these factors that may affect market conditions is crucial for crypto investors. This article will outline and introduce 6 events or factors with significant potential impact on the crypto market, as well as how to obtain and view relevant information, including CME BTC futures, Blockchain 50 Index, US Non-Farm Payrolls, US CPI Index, Federal Reserve FOMC meetings, and CFTC weekly reports.

1. CME BTC Futures Contract Gaps

CME BTC futures refers to the micro Bitcoin futures contracts launched by the Chicago Mercantile Exchange (CME), with specifications one-tenth of a standard Bitcoin contract, ticker symbol MBT, officially launched on December 18, 2017.

This contract aims to leverage the strength and liquidity of CME Bitcoin futures, making it more suitable for traders with smaller capital, providing participants with more choices and precision, and offering global investors effective tools for managing corresponding risk exposures. It is the latest addition to CME's growing suite of digital asset risk management tools. CME BTC futures will use cash settlement method, with prices based on CME's US dollar-denominated Bitcoin reference rate, offering more precise price discovery functionality and transparency. Its daily settlement will be the same as Bitcoin futures. Daily settlement is based on the volume-weighted average price (VWAP) of CME Globex trading between 3:59:00 PM and 4:00:00 PM Eastern Time.

CME's Bitcoin futures are closed on weekends, while Bitcoin trading is 24/7, causing the opening price after the weekend to be higher or lower than the last trading price of the previous week, forming gaps. Based on past experience, 90% of gaps will be filled. Through the appearance of gaps, investors can look for favorable trading signals to conduct contract trading, and these trading behaviors will have a certain impact on the market. In addition, industry analysts believe CME represents professional institutions, and large institutions are more willing to trade futures products through CME, a mature and regulated exchange. Therefore, its related data can reflect institutional movements to a certain extent and requires continuous investor attention.

For relevant information on CME BTC futures, you can visit websites such as King Data, Bybt, etc. to view, or view on major domestic financial websites. Additionally, Jincaijing website posts relevant briefs every Monday morning that you can view on your own.

2. Blockchain 50 Index

On December 24, 2019, the Shenzhen Stock Exchange launched the first blockchain index in both markets - the Blockchain 50 Index. The Blockchain 50 Index selects companies listed on the Shenzhen Stock Exchange whose business areas involve the upstream, midstream, and downstream of the blockchain industry as the sample space, ranks them by average daily total market capitalization over the past six months from high to low, and screens the top 50 stocks to form the sample stocks. The index uses free-float market capitalization weighting and conducts regular adjustments to sample stocks on the next trading day after the second Friday of June and December each year.

The Blockchain 50 Index is known as the "barometer" of the domestic blockchain industry and is an important tool for investment analysis, performance evaluation, asset allocation, and index investment in this细分行业. It can reflect the overall performance of blockchain-related companies in the Shenzhen securities market, providing investors with richer index investment tools.

The current Blockchain 50 Index reflects the overall situation of "coinless blockchain." Although this field has low overlap with "coin-based blockchain," it still has some macro impact on the crypto market. Moreover, this index is mainly published and traded in traditional financial markets, thus able to reflect the attention status of the traditional financial sector to the crypto industry. You can view details of the Blockchain 50 Index on the China Securities Index website.

3. US Non-Farm Payrolls

The US Non-Farm Payrolls (NFP) refers to the US non-agricultural employment index, reflecting the development of US manufacturing and service industries. It is an important indicator of whether the US economy is performing well, directly related to Federal Reserve monetary policy, and monetary policy decisions directly affect the US dollar trend, which is equally important for digital assets. Therefore, on the day when each non-farm index is released, it causes major earthquakes in global financial markets, with huge market volatility, and that evening is also known as "Non-Farm Night."

A decrease in the non-farm index number represents reduced production by enterprises and the economy entering a depression; in the absence of malignant inflation, if the number increases significantly, it reflects a healthy economic condition, theoretically beneficial to the exchange rate, and may预示 interest rate hikes, which would benefit the US dollar.

In traditional finance, gold and the US dollar are usually negatively correlated, meaning gold prices and non-farm data are usually negatively correlated. Bitcoin is known as digital gold. From historical data, Bitcoin prices and the US Dollar Index (an indicator comprehensively reflecting the exchange rate of the US dollar in the international foreign exchange market) have a strong correlation, generally negative.

For example, this August, US non-farm employment recorded only an increase of 235,000, the smallest increase since January 2021, far below economists' expectations of 730,000. After the data was released, the US dollar plunged, with the US Dollar Index briefly breaking below 92, while gold surged 1%, and Bitcoin briefly surged nearly 4% intraday, returning to the $51,000 mark, the highest since May.

However, opposite situations also occur, where when non-farm employment data is below expectations or below previous values, the US dollar and gold rise simultaneously. This trend reflects another function of the US dollar - safe haven, reminding crypto investors to treat patterns cautiously and consider the combined effects of multiple factors.

In summary, as one of the indicators that can profoundly affect the crypto market, the US Non-Farm Payrolls deserves investor attention. Related data is released by the US Department of Labor at 8:30 PM Beijing time on the first Friday of each month (9:30 PM Beijing time during winter time), including US non-agricultural employment data, unemployment rate, salary situation, etc. You can visit the US Department of Labor website (Home | U. S. Department of Labor (dol. gov)) to view directly, or view on major domestic financial websites such as Investing.com, Jinshishuju, etc.

4. US CPI Index

CPI is the Consumer Price Index, reflecting changes in the price level of consumer goods and services generally purchased by households, and is also one of the indicators quantifying inflation. This index is constructed by pricing a basket of different goods and services. If the index is higher than expected, the US dollar should be considered strong/bullish, while if the index is lower than expected, the US dollar should be considered weak/bearish.

The CPI index is closely related to inflation, and investors' inflation expectations affect digital asset prices. Meanwhile, digital asset traders always watch US inflation data to gauge the possible direction of Federal Reserve monetary policy in the coming months. The latest data from the US Department of Labor shows that US CPI rose 0.4% month-on-month in September, higher than the previous and expected 0.3%. Year-on-year, unadjusted CPI rose 5.4% in September, slightly up from 5.3% in August, but flat with June and July, the highest level since 2008. The International Monetary Fund (IMF) warned on October 12 that if inflation persists, the Federal Reserve and other global central banks should prepare contingency plans. This could mean the Federal Reserve raising interest rates earlier than expected to control price increases.

From long-term data, from 2006 to 2021, the Federal Reserve's balance sheet has grown 10 times, indicating that the pace of Fed money printing and bond purchasing has accelerated, injecting unprecedented liquidity into financial markets, objectively pushing up asset prices of all investment instruments, including digital assets.

Bitcoin is also experiencing inflation and has gained many returns from it. Since some digital assets like Bitcoin have supply caps, there is a view that such digital assets can serve as inflation hedge tools. So far, historical data supporting this claim is very limited. Some researchers found that Bitcoin and CPI have moderate to strong positive correlations in short-term and long-term investment horizons (as shown below), and the correlation between Bitcoin and CPI shows time-varying characteristics across different investment horizons.

Source: Xingqiu Daily

US CPI data is released by the Department of Labor on the third week of each month, roughly around the 20th-25th of each month. You can visit the US Department of Labor website (Access Denied (bls. gov)) to view directly, or view on major domestic financial websites such as Investing.com.

5. Federal Reserve FOMC Meetings

The Federal Reserve FOMC meeting, also known as the FOMC meeting, is the Federal Open Market Committee meeting, mainly tasked with deciding US monetary policy, achieving balance between economic growth and price stability through monetary policy regulation. The main content of the meeting is to decide future monetary policy, not only interest rates but also other policy decisions, directly affecting market investment sentiment.

The Federal Reserve FOMC meeting is one of the important factors affecting gold price trends. Generally, when the Federal Reserve decides to raise interest rates, it benefits the US dollar, and gold prices fall; when the Federal Reserve decides to cut interest rates, it is bearish for the US dollar, and gold prices rise; when the Federal Reserve keeps interest rates unchanged, investors need to refer more to other factors affecting gold prices.

As shown below, researchers have mapped historical Bitcoin price performance with Federal Reserve rate hike timing, finding that rate hikes often correspond to Bitcoin price declines.

Source: Bifan

Beyond this intuitive connection, reports from Bloomberg, Singapore's DBS Bank, and others also point out increasing correlation between US stocks and Bitcoin. Researchers infer that when Federal Reserve quantitative easing policy changes, it directly affects US stocks; and given the correlation between Bitcoin and US stocks, there is reason to believe Bitcoin will experience significant volatility due to Federal Reserve rate hikes. As more and more US-listed companies increase their holdings of Bitcoin, this connection may become increasingly close.

Here's a specific case. On the eve of the September Federal Reserve FOMC meeting, the crypto market experienced volatility, with other assets such as stocks and commodities also falling. Market explanations for the causes of the broad selling varied, with analysts predicting the Federal Open Market Committee (FOMC) might announce scaling back current monetary stimulus at the September 22 meeting. This expectation was considered a major reason for the crypto market plunge. Joe Di Pasquale, CEO of digital asset hedge fund Bit Bull Capital, stated that with the influx of institutional investors and general overlap in market participants, we have seen the crypto market and traditional markets becoming increasingly correlated. When market participant groups in traditional and crypto markets become more homogeneous, we may see this correlation further strengthen.

The Federal Open Market Committee holds 8 regular meetings annually and additional meetings as needed. Meeting times, policy statements, meeting minutes, and related information can be viewed on the official website at the following link: Federal Reserve – Meeting Calendars and Information (federalreserve. gov). You can also see Federal Reserve FOMC meeting schedules and related information on domestic financial websites such as Huitongwang.

6. CFTC Weekly Reports

The CFTC weekly holdings report refers to the holdings data routinely released at 3:30 PM local time every Friday by the US Commodity Futures Trading Commission (CFTC), or 3:30 AM (daylight saving time) or 4:30 AM (standard time) Beijing time every Saturday. The report reflects trading positions as of the market close on Tuesday of that week.

The CFTC requires clearing members and futures brokers of futures exchanges to submit position reports daily, similar to the futures company position seats published by domestic exchanges. The purpose of publishing position reports is to increase market transparency and prevent any trader's position from being too large and manipulating the market.

The CFTC position report can effectively reflect capital flows in the market and can help judge corresponding asset price trends by tracking market dynamics and combining statistical analysis of historical patterns. Especially for markets where capital occupies a dominant position, tracking capital flows can help judge market activity level, and through analysis of some historical patterns, can even determine when market inflection points will arrive.

The most noteworthy data in this report is total open interest, the total amount of open positions, which can be used to measure market activity level. According to the latest CFTC position report (October 13-19), total market positions are as follows:

Source: ChainNews

The holding value of CME Bitcoin futures is constantly refreshing historical highs, and market participation enthusiasm has surged rapidly under the stimulus of the latest breakout rally.

Another indicator worth attention is asset manager/institutional holdings data. The latest report shows: Asset managers conducted synchronized two-way increases in long and short positions during the latest statistical period, with long positions showing significant growth while short position increases were relatively limited. The proportion of long positions in such accounts returned to above 70% for the first time in 10 weeks, indicating asset managers maintain a trend-following attitude toward this short-term rally.

Source: ChainNews

You can download and view the original CFTC weekly report on the CFTC official website at the following link: Commodity Futures Trading Commission | CFTC.

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