Panic in the market after a crash: Is this the end of the bull market or the beginning of a bear market? As a practitioner who has experienced multiple market cycles, I believe that determining the market direction cannot rely on guessing, but should focus on these key signals.
This round of decline had actually been signaled early. A month ago, the market showed dangerous signs, but most investors chose to ignore them:
Small cryptocurrencies experiencing abnormal surges: When mainstream cryptocurrencies are stagnant, a large number of small cryptocurrencies without fundamental support suddenly skyrocket by 2-3 times. This situation is highly similar to the characteristics observed at the peaks of previous bull markets, indicating that capital is shifting from value investment to pure speculation.
Halving cycle rule: Historical data shows that the 18-20 months following each Bitcoin halving are dangerous periods. The bear markets of 2018 and 2022 occurred during this time window, and we are currently in this sensitive period.
Key technical levels breached: Multiple important support levels have been consecutively broken, and the medium to long-term trend lines have been damaged, which cannot be explained by normal market adjustments.
Liquidity tightening: The Federal Reserve's policy has turned hawkish, leading to a tightening of global liquidity expectations. As a market highly dependent on capital inflow, the lack of incremental funds entering the cryptocurrency market will inevitably lead to difficulty in sustaining the market trend.
Large-scale leveraged liquidations: In the past week, the total liquidation amount across the network reached $12 billion. Such a scale of leverage liquidation will inevitably trigger a chain reaction, exacerbating the market decline.
My judgment is: The market has entered a phase of oscillation searching for a bottom, with significant bear market risks. If key support levels are effectively broken, the probability of entering a bear market will exceed 70%.
However, we should not be overly pessimistic. Data shows that compliant crypto products have still seen a net inflow of $180 million recently, indicating that institutional funds have not completely exited the market, which is different from the collective flight of institutions at the beginning of previous bear markets.
Practical advice for investors:
Maintain sufficient cash: It is advisable to retain 40%-50% cash position to ensure enough ammunition when the market hits the bottom.
Focus on quality assets: Stay away from small coins that are purely speculative, and focus on mainstream assets with real application scenarios and institutional holdings.
Cautious bottom fishing: Do not easily predict the market bottom; patiently wait for clear stabilization signals before considering gradual positions.
The market always moves between bull and bear phases. Instead of overly focusing on short-term fluctuations, it is better to use market calm periods to accumulate knowledge and improve understanding. True investment opportunities often arise during the most pessimistic times in the market.
