Opening with a soul-searching question: when the screen is filled with red liquidation alerts, do you follow the trend and cut losses or buy the dip? Last week's "black storm" in the crypto market obliterated the positions of 270,000 investors, with $985 million in liquidation amounts hiding not the ruthlessness of the market, but rather the trap of uncontrolled emotions. As someone who has been navigating the crypto space for eight years, today I'll unpack the survival rules under panic emotions to help you avoid the next "river of blood" pit.
First, let’s give newcomers a lesson: market sentiment is never an ethereal feeling, but rather the "invisible hand" that can be quantified through data. Before this crash, there were actually three major signals warning of impending panic. The first is the Fear and Greed Index, which had already fallen into the deep panic zone three days before the crash, with a value dropping below 20, indicating that market sentiment had become fragile to the point of collapse. The second is the flow of funds on exchanges; data shows that in the 48 hours before the crash, the net inflow of mainstream cryptocurrencies into exchanges surged by 300%, suggesting that a large number of holders were quietly preparing to cash out, and selling pressure was building up in the background. The third is the change in leverage; retail long leverage surged to a nearly three-month high, while whales were continuously reducing leverage. This divergence of "retail adding leverage to take over, whales holding light positions and observing" is itself a dangerous signal following overheating sentiment.
Many people will ask: What exactly ignited this panic? The core trigger is actually the cooling of expectations for interest rate cuts by the Federal Reserve. When three Federal Reserve officials expressed concerns about inflation on the same day, the market's expectation probability for a rate cut in December directly dropped below 50%. Here, I want to share a key logic: cryptocurrencies, as typical high-risk assets, are extremely sensitive to liquidity. Once the expectation for interest rate cuts fails, the marginal tightening of dollar liquidity means that funds will withdraw from high-risk assets, and the cryptocurrency market will naturally be the first to bear the brunt. Interestingly, this decline also saw the self-fulfilling prophecy of the "four-year cycle theory," where many large holders actively reduced their positions based on this notion, further exacerbating panic and creating a vicious cycle.
Next is the practical advice: How to protect your position amid panic? First, controlling leverage is the bottom line. Among the 270,000 people who faced liquidation this time, over 80% were high-leverage long positions. In times of severe market volatility, high leverage is like binding yourself to the front of a roller coaster; any slight disturbance can throw you off. My advice is that ordinary investors should avoid leverage as much as possible; even if you must use it, the leverage ratio should not exceed three times. Second, pay attention to on-chain capital flow. When mainstream cryptocurrencies show sustained net inflows to exchanges, it's time to be cautious; conversely, if there is a net outflow, it indicates that funds are laying out long-term positions, which could be a signal of warming sentiment. Third, do not be swayed by short-term fluctuations. Bitcoin has retraced more than 30% from its historical high at the beginning of October, causing many to panic. However, historical data shows that Bitcoin always experiences a 30%-50% correction after each major bull market, which is the normal rhythm of the market.
Finally, I want to share a few heartfelt words with everyone: The cryptocurrency market has always been a battleground of emotions and rationality. Fear and greed are the arch-enemies of investors; those who can make money in the market over the long term do so not because they can accurately predict market trends, but because they can control their emotions. Although the market is currently in a state of panic, it is not entirely devoid of opportunities. The increase in institutional capital's share means that the market will be more rational in the future. Projects with real application scenarios will actually present good layout opportunities after a correction. If you currently feel helpless or confused about trading and want to learn more about cryptocurrency and cutting-edge information, follow me@标哥说币
