Macroeconomic transmission fails, loss liquidation dominates, BTC down 2.91% for the week | Bitcoin | Research Report | Cryptocurrency Market Analysis | Bottoming Phase

This week, the macroeconomic environment and the crypto market structure showed a significant divergence. $Bitcoin (BTC.CC)$ Volatility led to a downward trend with a weekly decline of 2.91%, indicating that the expected effects of reduced Fed rate hike expectations did not materialize; instead, internal deleveraging and sell-offs dominated price movements.

On the macro front, US July CPI data came in below expectations, driving down 2-year US Treasury yields and marginally easing short-term monetary tightening pressures, leading the market to largely rule out a September rate hike. However, the Fed's net liquidity remained unchanged, 10-year US Treasury yields rose, and the US Dollar Index climbed to 99.67, keeping overall financial conditions tight and creating headwinds for BTC.

The slight easing signals from slowing macro inflation failed to effectively transmit to the crypto market. Spot ETFs and stablecoin supply reversed last week's modest inflow trend, both recording outflows.

According to the 'EMC Labs BTC Cycle Judgment Model,' BTC is in a transition phase from the 'decline period' to the 'bottoming phase.' Characteristics of the bottoming phase are becoming more apparent, but depressed sentiment and sluggish trading volumes make it difficult to definitively conclude that a cycle-level bottom has been reached.

Macro-Financial Conditions

This week, macro financial conditions exhibited an intertwined pattern of 'marginal easing in short-end tightening, while long-end risk-free rates and exchange rates continued to exert pressure.'

Regarding central bank liquidity and monetary policy, Fed net liquidity remained unchanged for the week, with no incremental fiat injection. SOFR stabilized at 3.62%, also unchanged, indicating that base liquidity in the interbank market remained stable and neutral. With inflation data and consumer confidence figures both coming in below expectations—the most significant macroeconomic data points of the week—the market has significantly lowered the probability of a rate cut in September.

The decline in inflation data alleviated market concerns about sticky inflation and reinforced expectations that the Fed will hold rates steady, driving the 2-year US Treasury yield down slightly by 1bp to 3.70%, offering the possibility of marginal valuation repair for risk assets. However, the long end of the yield curve and the foreign exchange market continued to impose tight financial constraints. The 10-year US Treasury yield rose by 4bp to 4.70%, steepening the yield curve, which reflects the market's increased demand for risk premiums related to future fiscal deficits and nominal growth risks. The US Dollar Index edged up 0.07% to close at 99.67, showing that fiat currency appeal remains robust. High long-end interest rates (4.70%) and a strong US dollar (99.67) maintained a high opportunity cost for risk-free assets, offsetting the benefits of lower short-end rates.

The US stock market also showed divergence: the S&P 500 rose 0.36% to 7,785.76, the Nasdaq edged up 0.14% to 26,729.16, while the Dow Jones Industrial Average fell 0.56% to 53,732.41. Combining hard data and event impacts, current financial conditions fail to provide momentum for structural balance sheet expansion, limiting the efficiency of cross-market macro capital transmission.

Cryptocurrency market

The crypto market this week featured net capital outflows, contracting spot liquidity, and counter-trend accumulation of leverage. Market movements were primarily driven by long positions cutting losses and short leverage squeezing out longs.

In terms of price and spot liquidity, Bitcoin closed the week at $63,019, with a weekly decline of 2.91% and a weekly volatility amplitude of 4.56%. Prices remained under pressure below the 30-day moving average ($64,225), the 90-day moving average ($65,415), and the 200-day moving average ($69,280).

Spot market trading remained subdued, with the 7-day average spot trading volume dropping to 49,535, a month-on-month decline of 8.29%. Both fiat and traditional capital channels are in a state of net contraction: Bitcoin spot ETFs saw a single-week net outflow of $382.48 million, with the largest single-day net outflow of $142.46 million recorded on August 10; the total supply of stablecoins simultaneously decreased by $328.49 million.

Meanwhile, exchanges recorded a net inflow of 1,341.51 BTC, confirming marginal selling pressure on the spot side. Regarding derivatives and leverage structures, open interest expanded counter-trend by 3.68% week-on-week to $61.66 billion amidst shrinking spot volumes and falling prices, reflecting the passive accumulation of leveraged funds during the price decline. However, the funding rate has dropped to 0.00%, the 7-day average derivatives trading volume fell 13.77% month-on-month to $22.76 billion, and long liquidations totaled $98.94 million for the week, significantly higher than short liquidations.

In terms of on-chain筹码 (chip) distribution and holder structure, the overall market MVRV ratio declined by 0.03 to 1.20. The long-term holder MVRV dipped slightly to 1.30, while the short-term holder MVRV fell to 0.92, indicating that short-term holders are now in a state of unrealized losses. Regarding holding behavior, the supply held by long-term holders decreased by 17,397 BTC over the week, while the supply held by short-term holders increased by 21,323 BTC. Coupled with the long-term holder SOPR rising to 0.96 and the short-term holder SOPR remaining at 1.00, this reflects that long-term holders are still selling at a loss, while short-term holders are primarily holding positions and waiting, with no large-scale panic selling yet.

Market Implication

Based on a multi-dimensional analysis, we determine that the essence of this week's market movement was a shift from net inflows to net outflows of incremental capital. Insufficient market absorption, combined with stop-loss selling by both short-term and long-term holders, led to a gradual decline in Bitcoin's price. However, the absence of panic selling allowed the price to remain above $60,000.

Outlook for the Coming Period

July FOMC Minutes (Wednesday, August 19): The Federal Reserve will release the minutes from its July 28–29 policy meeting. The market will focus on discussions within the Fed regarding the risks of sticky inflation versus cooling in the labor market, as well as officials' hawkish or dovish stances on the future interest rate path. If the minutes indicate that the Fed is inclined to maintain restrictive high rates for longer due to sticky inflation, it will push the 10-year US Treasury yield (currently at 4.70%) and the US Dollar Index (currently at 99.67) higher, thereby tightening fiat liquidity and exerting downward pressure on Bitcoin. Conversely, if the minutes emphasize labor market weakness and hint at future easing, yields may fall, improving the liquidity environment for crypto assets.

PBOC LPR Rate Decision (Thursday, August 20): The People's Bank of China will announce the one-year and five-year Loan Prime Rates (LPR). If the central bank adopts easing policies or injects liquidity, it will help improve global liquidity conditions. Easing in Eastern financial markets will transmit to global risk appetite, providing marginal support for cross-border liquidity-sensitive assets such as Bitcoin.

US S&P Global Preliminary PMI Data (Friday, August 21): S&P Global will release the preliminary August Manufacturing and Services PMIs. If services activity exceeds expectations and input cost indicators remain strong, it will reinforce the 'higher for longer' interest rate expectation, keeping long-end yields elevated and suppressing Bitcoin valuations. Weak data, however, would confirm an economic slowdown and alleviate discount rate pressures.

US Weekly Initial Jobless Claims and Regional Activity Index (Thursday, August 20): Weekly initial jobless claims and the Philadelphia Fed Manufacturing Index will provide real-time monitoring of the labor market and industrial activity. A surprising surge in jobless claims will trigger concerns about an economic slowdown and accelerate expectations for rate cuts, which may temporarily weigh on the DXY and benefit digital asset liquidity.

Global Major Economy Inflation Data and Geopolitical Risks (August 17–21): Inflation reports from major global economies, including Canada's CPI (August 17), the UK and Eurozone CPI (August 19), and Japan's CPI (August 21), will be released consecutively. Sticky global inflation will limit the easing space for major central banks. Meanwhile, close attention should be paid to developments in the Middle East and energy markets. If oil prices drive up inflation expectations, it will raise government bond yields and trigger safe-haven selling in risk assets and Bitcoin.

The above analysis is provided by EMC Labs.

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About EMC Labs

EMC Labs is a strategic partner of Victory Securities. Together, they have launched the Victory EMC BTC Cycle Fund—the only virtual asset fund approved by the Securities and Futures Commission to accept stablecoin subscriptions. EMC Labs was co-founded by seasoned digital asset investors and data scientists, with a core team drawn from JD Finance, Bell Labs, and Marsbit. EMC Labs has invested significant resources in building a proprietary engine to analyze Bitcoin on-chain data and technical indicators.

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