Fear and greed cycle again in the cryptocurrency market, and smart money is positioning itself.
"Bitcoin is finished, this time it's different!" When the collapse of LUNA and FTX triggered a chain reaction, pessimism spread across the market as Bitcoin fell to $15,000.
However, just a year later, institutions like BlackRock entered the market, initiating a major upward trend, and Bitcoin soared to a historic high of $69,000.
Subsequently, when investors who missed out on Bitcoin flocked to Ethereum, they encountered a price drop to $1,300 due to the tax battle in April, and many once again claimed that Ethereum lacked value. As a result, Ethereum quietly rebounded threefold, breaking through $4,800.
Today, a similar story is unfolding again. In the face of market pullbacks, many are once again shouting that 'the blockchain dream is dead.'
Emotional cycle: The greatest certainty in the crypto market
The collective psychological swings of market participants are the only constant in the crypto market. Graham's 'Mr. Market' metaphor is amplified to the extreme in the cryptocurrency field.
According to gray research, since Bitcoin bottomed out in November 2022, the market has experienced 9 declines of over 10%. The current pullback of about 30% is consistent with historical averages and is a typical 'bull market pullback' rather than a cyclical retracement.
Historical data shows that Bitcoin prices typically experience at least 3 declines of over 10% each year, with an average pullback of about 30%. Those who sell in panic often miss the subsequent rebound.
How to identify 'golden pits' and 'true bottoms'
1. Focus on institutional fund flows
In the recent market pullback, listed companies and institutional investors are quietly increasing their holdings. Data shows that over 92% of newly added Bitcoin is absorbed by wallets that have held for more than 155 days, with exchange BTC balances falling to multi-year lows.
Institutional funds continue to flow in through ETPs (exchange-traded products), and ETPs for Ripple and Dogecoin have also begun trading. This indicates that despite price volatility, traditional finance's interest in crypto assets has not waned.
2. Monitor on-chain indicators and derivatives signals
When the skew of Bitcoin put options is at a very high level, it usually indicates that the market has widely hedged against downside risks, which may signal a short-term bottom.
At the same time, when the 'sleeping coin activation volume' (CDD) surges, it indicates that long-term holders are starting to move their tokens, which may signal a market turning point.
3. Understand the impact of the macro environment
The Federal Reserve's monetary policy significantly impacts the crypto market. A rate-cutting cycle usually benefits alternative assets like Bitcoin, while a decline in real interest rates has a negative effect on the value of the dollar, thus supporting Bitcoin prices.
Currently, the market's expectations regarding Federal Reserve policies are intensifying short-term volatility, but long-term structural factors remain favorable.
Become a 'contrarian investor' in the crypto market
To be greedy when others are fearful requires not only courage but also a rigorous framework.
Asset allocation strategy: Divide the portfolio into core allocation (Bitcoin, Ethereum) and tactical opportunity allocation, with the former occupying the majority of positions.
Investment mechanism: Use market pessimism to build positions, starting dollar-cost averaging when the Bitcoin MVRV ratio falls below 1.2.
Narrative analysis: Focus on the fields that truly drive technological development, such as RWA (real-world assets), DePIN (decentralized physical infrastructure networks), and AI agents, rather than short-term hotspots.
Conclusion: Pessimists are right, optimists make money
The crypto market is never short of crises, but new highs always emerge after each crisis.
Market sentiment swings between excessive optimism and excessive pessimism, while real value accumulates in pessimism and is realized in optimism. When the next tide of liquidity arrives, today's so-called 'golden pit' may be referred to by future generations as the 'last chance to board.'
In this field, pessimists always seem right, but only optimists can truly move forward. If you believe in the long-term future of crypto technology, consider following.
