Let me first analyze why hedge funds have suffered such significant losses. There are two core reasons: first, the institutional funds introduced by ETFs and structured products have compressed the arbitrage space, rendering traditional arbitrage strategies ineffective; second, the rapid decline triggered by Trump's campaign remarks in October exposed the issue of market liquidity exhaustion, causing many funds to be forced to liquidate due to collateral mismatches.
There is a deadly pitfall here that many retail investors are prone to fall into: seeing that a fund has heavily invested in a certain type of coin, they think, 'Institutions are buying, it must be safe,' and then they follow suit to buy at the bottom. But what you don't know is that many funds are currently passively reducing their holdings in altcoins and shifting towards the DeFi sector. In other words, the bottom you are trying to catch might be a variety that funds are currently cutting losses on, and in the end, you will only get deeply trapped.
Regarding the market trends, my personal judgment is that the adjustments of crypto hedge funds are not over yet; we won't see clear signs of stabilization until at least the first quarter of next year. Why? Because the funding situation is tight at the end of the year, institutions are withdrawing funds to make their books look good and won't enter the market on a large scale; moreover, although there are strong expectations for the Federal Reserve to cut interest rates, it hasn't happened yet, and the market is still waiting for clear signals. In the short term, altcoins will continue to be under pressure, and mainstream coins will also fluctuate.
Pitfall guide: 1. Firmly avoid small-cap altcoins heavily invested in by funds, especially those with no real application scenarios; 2. At this stage, prioritize mainstream coins and control your positions, with a maximum not exceeding 50%; 3. Do not touch any leveraged products; the market is highly volatile right now, and leverage will only amplify risks.
Do you remember before the LUNA crash in 2022, I reminded everyone to stay away from high-leverage algorithmic stablecoin funds? At that time, many people didn't listen, and in the end, they lost everything. Now history is repeating itself, just with a different main character. To survive in the crypto world for the long term, you must learn to follow the rhythm of institutions, but not to blindly copy and buy the dip; rather, you should wait for signs that institutions have completed their accumulation. Follow me@币圈罗盘 , in the next article, I will interpret the impact of the US CPI data on the cryptocurrency market!
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