This article is reprinted with authorization from City Coin Trader, and the copyright belongs to the original author.
Recently, Bitcoin has experienced a pullback from its high, compounded by the concentrated sell-off from ancient whales, leading to a persistent atmosphere of market panic. Meanwhile, MicroStrategy (MSTR), regarded as the "U.S. stock leverage" for Bitcoin, has seen its stock price decline continuously since July 15, with a cumulative drop of over 20% across 12 trading days. The trading volume of its put options surged by 300% month-on-month, further exacerbating the market's pessimistic sentiment. According to Market Chameleon, the difference in implied volatility between one-year put and call options for Bitcoin turned positive on July 24 and reached 4.8% on August 1, marking a new high since April 9. This change indicates that traders are increasing their bets on further declines in MSTR's stock price. So, will MSTR's further decline drag down Bitcoin?
Although MSTR's price movements have historically been highly correlated with Bitcoin, this round of decline more reflects an early release of its financial risks: as the low-interest convertible bond financing window closes, the company is shifting to a more aggressive capital structure—financing tools are gradually upgrading from common stock and preferred stock to high-cost floating-rate perpetual preferred stock. This shift not only significantly raises the credit risk premium but also substantially increases the pressure of annual dividend payments. According to the terms of the preferred stock issued by MSTR, the total annual dividend payment will reach $587.7 million, specifically composed of: STRK ($45.04 million), STRF ($210 million), STRD ($110 million), and STR-C ($222.66 million). Based on the financing plan disclosed on August 1, if MSTR completes the issuance of $4.2 billion in preferred stock (with a coupon rate of 9%), the annual dividend payment will surge to $965.7 million, a 64% increase from the current level. Given that MSTR's cash flow is highly dependent on financing, if external fundraising encounters obstacles, the company may face default risks or be forced to sell its Bitcoin reserves—this also explains why its one-year put option implied volatility has recently soared.
However, considering that MSTR's asset premium rate is still nearly 35%, the short-term bubble effect on Bitcoin is minimal (unless the asset premium rate turns negative).
In the previous article, the author pointed out that there is a short-term adjustment demand for Bitcoin, mainly due to its rapid rise during the breakthrough of historical highs, leading to a gap in chip distribution. According to glassnode data, after breaking through $120,000, the proportion of Bitcoin holders who have not realized profits has exceeded two standard deviations (2SD), meaning that over 95% of holders are in profit. Notably, since November 2021, whenever the proportion of Bitcoin investors who have not realized profits exceeds two standard deviations, the probability of experiencing a volatile adjustment in the following two months reaches 100%.
Recently, after two weeks of adjustment, Bitcoin has begun to exchange chips in the $117,000-$110,000 range. The market's 30-day average holding cost has gradually risen from $112,000 to $114,500, and the proportion of holders with unrealized profits has fallen from 95.3% to below 90% (currently 89.7%). Referring to the previous two rounds of adjustments, the proportion of investors with unrealized profits returned to near the mean, even if the downward adjustment space for Bitcoin is not large (the last round of adjustment was 11.2%, and this round is likely to be less than 11.2%, but 8% has already been completed), the current sideways trading time is still clearly insufficient.
On August 2, the Chairman of the U.S. Securities and Exchange Commission (SEC) officially launched the "Project Crypto" regulatory innovation plan, which introduces three core initiatives for the first time—relaxing asset issuance access standards, establishing a technology innovation exemption mechanism, and cultivating super applications with scale effects, aiming to systematically enhance the United States' leadership in the global crypto asset field. Since this plan mainly focuses on asset tokenization (especially RWA) and application innovation (particularly in the DeFi direction), Ethereum has once again received strong policy support following the "GENIUS Act."
Ethereum's advantage in this context stems from its systemic advantages in the crypto economic ecosystem, mainly reflected in three aspects: first, Ethereum carries 53% of the total value of stablecoins in the entire market and processes 45% of the daily trading volume of stablecoins; second, in the decentralized finance sector, Ethereum's protocol locks in value accounting for as much as 65%, while supporting nearly 80% of the tokenized U.S. Treasury market; most importantly, institutional participants, including leading trading platforms like Coinbase, Kraken, and Robinhood, as well as tech giants like Sony, have chosen Ethereum as their preferred infrastructure network for blockchain business.
With the dual policy support of the "GENIUS Act" and "Project Crypto," Ethereum is transforming from a public chain platform into a core hub connecting traditional finance and the crypto economy, and its "institutional-level" network effects have formed insurmountable competitive barriers. These policy dividends not only consolidate Ethereum's market leadership but also signal that the crypto industry is about to usher in a new wave of institutional development.
In July, the cryptocurrency market showed significant differentiation: the FTSE/Grayscale Cryptocurrency Industry Market Index (which tracks the market capitalization of investable digital assets) rose by 15% cumulatively, with Ethereum performing the best, surging 49% in a single month, significantly outperforming Bitcoin's 8% increase and other categories of digital assets. This indicates that the market's driving forces are undergoing a significant shift. In a stock pattern, funds always flow in the direction of least resistance. When the trend is already very clear, ordinary people can simply follow!
Related: Conflux: The True Face of China's "Ethereum"? On-chain data reveals hidden centralization risks!
Original article: “Going Long on Ethereum Has Become the Only Consensus”
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