If an economic collapse leads to a drastic drop in cryptocurrency prices, here are my unconventional experiences to share. I used data from after 2000 as a reference, focusing on four indicators:
I. Whenever there is a problem in the US economy, the S&P 500 index in the US stock market will drop significantly; we can take it as a reference:
In 2001, the tech stock bubble burst, and the S&P 500 fell nearly 50% at most, averaging a drop of 22%;
During the 2008 financial crisis, the S&P 500 fell by as much as 57%, averaging a drop of 38%;
In early 2020, when COVID-19 just started, the S&P 500 fell by as much as 34%, averaging a drop of 28%.
Looking at it this way, during each major drop, the S&P 500 can average a decline of over 20% to 30%. So my approach is simple:
Wait for the S&P 500 to drop about 20% from now (for example, if the S&P 500 is currently at 5000 points, dropping to below 4000 points or around 4400 points), and then start buying Bitcoin in batches.
II. Watch the market panic thermometer - VIX index
This is like a heartbeat monitor for the US stock market; the higher the number, the more panic there is. Typically:
• Around 30 = (normal correction)
• Above 50 = (economic recession)
• Breaking 80 = ICU emergency (both the 2008 financial crisis and the 2020 pandemic crash reached this level)
My strategy: wait for the panic index to break 70 and start slowly buying Bitcoin, just like waiting for the beginning of a supermarket sale.
III. Look at Bitcoin's 'floor price' - URPD data
This is equivalent to Bitcoin's support level, which has been tested multiple times in the last two months effectively. Currently, I judge:
• $70,000-$80,000 may serve as a safety cushion.
• It may briefly drop below $70,000 (wick), but it is likely to bounce back.
My approach: start buying in batches when it drops below $75,000, but I'm afraid I might miss that price, so I use it in conjunction with other indicators.
IV. Look at the loss line of veteran players - Entity-Adjusted LTH-NUPL indicator
This data is essentially a measure of whether long-term holders are collectively losing money. Historical data is 100% accurate, but it is uncertain whether it will trigger a red alert during an economic crisis.
My trump card: if this indicator turns red, buy aggressively, adding more as it drops.
Important reminder:
Except for the fourth indicator, the others aren't 100% reliable.
Even if all indicators align, it's impossible to buy at the lowest point.
You must buy in batches (for example, add to your position every 10% drop).
Also, consider the Federal Reserve's policy, wars, and other major events.
For example: just like the pandemic crash in March 2020, when the market panic reached its peak (VIX broke 80) and Bitcoin fell to over $4,000, it was a great opportunity to scoop up. But ordinary people shouldn't expect to buy at the lowest point; it's safer to buy in 3-5 batches gradually.
Final advice: never go all in! Prepare some spare cash that you can afford to lose, and be mentally ready to buy more even if it drops 30%. When the market goes crazy, even indicators can fail; it's safest to leave some margin.
