Written by: Luke, Mars Finance.
For crypto investors who experienced the magnificent bull market of 2020-2021, the current market is undoubtedly confusing and agonizing. That was a carnival era ignited by global central banks' 'massive easing,' overflowing liquidity, and rising prices across the board, where buying any project with eyes closed seemed to yield incredible returns. However, those days are gone. Now, the global financial market hangs in a delicate balance: on one hand, surprisingly strong US economic data, and on the other, the Fed's steadfast hawkish stance, with a historically high interest rate environment weighing down on all risk assets.
This paradigm shift led by the macro environment has made this crypto cycle the 'most difficult era' for retail investors. The previous model of relying on liquidity-driven, purely emotional speculation has failed, replaced by a 'value bull' market that places greater emphasis on intrinsic value, driven by clear narratives and fundamentals.
However, the other side of difficulty is opportunity. When the tide recedes, true value investors will welcome their 'golden era.' For it is in such an environment that institutional compliance entry, programmatic deflation of technology, and real applications integrated with the real economy can highlight their true, cyclical value. This article aims to deeply deconstruct this profound transformation and clarify why this challenging era for speculators is precisely the golden road paved for prepared investors.
1. The most difficult era: When the tide of 'massive easing' recedes.
The difficulties of this cycle stem from a fundamental reversal in macro monetary policy. Compared to the extremely friendly environment of 'zero interest rates + unlimited quantitative easing' in the last bull market, the current market faces the harshest macro headwinds in decades. To curb the most severe inflation in 40 years, the Fed has initiated an unprecedented tightening cycle, bringing dual pressure to the crypto market and completely ending the old model of easy profits.
1. The macro data maze: Why rate cuts are a long way off.
The key to unlocking the current market predicament lies in understanding why the Fed is reluctant to ease at the end of the rate hike cycle. The answer is hidden in recent macroeconomic data—these seemingly 'good' data points have become 'bad news' for investors hoping for easing.
Stubborn inflation and hawkish dot plots: Although inflation has retreated from its peak, its stickiness is far beyond expectations. The latest data shows that while the US CPI year-on-year rate in May was slightly below expectations, the core inflation rate remains stubbornly high at 2.8%.
There is still a significant gap from the Fed's 2% target. This stubbornness is directly reflected in the Fed's latest economic forecast (SEP) and the closely watched 'dot plot.' After the June meeting, Fed officials significantly lowered their interest rate cut expectations, reducing the median number of cuts for the year from three to just one. This hawkish shift has severely dampened market optimism. As Powell mentioned in the post-meeting news conference: 'We need to see more good data to bolster our confidence that inflation is continuing to head toward 2%.' In other words, the Fed's threshold for cutting rates has become very high.
A strong labor market: Meanwhile, the US labor market continues to show remarkable resilience. The non-farm payroll report for May showed new jobs reached 139,000, better than market expectations, while the unemployment rate remained low at 4.2%. A strong labor market implies consumer spending is supported, which in turn adds upward pressure on inflation, making the Fed more hesitant on rate cuts.
Powell's 'historical script': As pointed out by Nicholas Colas, co-founder of DataTrek Research, current Chair Powell is following the script of his predecessors, adopting a hawkish tone in the final phase of his tenure to solidify his historical legacy of successfully curbing inflation. This consideration of personal and institutional reputation means that unless there is a cliff-like decline in economic data, the policy shift will be extremely cautious and slow.
2. The 'gravity' of high rates: The 'bleeding' effect of crypto assets.
This macro backdrop has directly led to the difficult situation in the crypto market:
Liquidity exhaustion: High rates mean a reduction in 'hot money' in the market. For the crypto market, especially altcoins, which heavily rely on new funds coming in to drive price increases, the tightening of liquidity is the most fatal blow. The once ubiquitous 'everything rises' spectacular has been replaced in this cycle by structural trends of 'sector rotation' or even 'only a few hot spots.'
Opportunity cost skyrockets: When investors can easily obtain more than 5% risk-free returns from US Treasury bonds, the opportunity cost of holding assets like Bitcoin, which do not generate cash flow and have extreme price volatility, sharply increases. This has led to significant outflows from the crypto market by funds seeking stable returns, further exacerbating the market's 'bleeding' effect.
For retail investors accustomed to chasing hot spots amidst abundant liquidity, this change in environment is brutal. Strategies lacking in-depth research and merely following trends are likely to suffer heavy losses in this cycle, which is the core of the 'difficulty' in this cycle.
2. The most golden era: From speculation to value, the emergence of new opportunities.
However, the other side of the crisis is opportunity. The macro headwinds act like a stress test, squeezing out market bubbles and filtering out truly valuable core assets and narratives, thereby opening an unprecedented golden era for prepared investors. The resilience of this cycle is driven by several strong endogenous forces independent of macro monetary policy.
1. The golden bridge: Spot ETFs open the institutionalization year.
In early 2024, the US Securities and Exchange Commission (SEC) historically approved the listing of spot Bitcoin ETFs. This is not just a product launch, but a revolution in the crypto world. It opens a 'golden door' for trillions of dollars in traditional finance to invest in Bitcoin in a compliant and convenient manner.
An endless stream of fresh capital: By the second quarter of 2025, the combined assets managed by BlackRock's IBIT and Fidelity's FBTC ETFs have exceeded hundreds of billions of dollars, with continuous daily net inflows providing strong purchasing power to the market. This 'new fresh capital' from Wall Street significantly hedges against the liquidity tightening caused by high interest rates.
The anchor of confidence: BlackRock CEO Larry Fink referred to the success of Bitcoin ETFs as 'a revolution in capital markets' and stated that this is just 'the first step of asset tokenization.' This endorsement from the world's largest asset management company greatly enhances market confidence and provides retail investors with a clear signal to follow institutional footsteps and engage in long-term value investing.
2. The faith in code: Hardcore support under the halving narrative.
The fourth Bitcoin 'halving' in April 2024 reduces its daily new supply from 900 coins to 450 coins. This code-defined, predictable supply deflation is Bitcoin's unique charm compared to all traditional financial assets. Under the backdrop of stable or even growing demand (especially from ETFs), the halving provides solid, mathematical underlying support for Bitcoin's price. Historical data shows that Bitcoin's price has set new all-time highs within 12-18 months after the first three halvings. For value investors, this is not a short-term speculative gimmick, but a reliable, long-term logic that transcends cycles.
3. The narrative revolution: When Web3 begins to address real problems.
Macro headwinds force market participants to shift from mere speculation to digging into the intrinsic value of projects. The core hotspots of this cycle are no longer the baseless 'Dogecoins,' but innovative narratives that aim to solve real-world problems:
Artificial Intelligence (AI) + Crypto: Combining the computational power of AI with the incentive mechanisms and data ownership of blockchain to create entirely new decentralized intelligent applications.
Tokenization of real-world assets (RWA): Bringing real-world assets such as real estate, bonds, and art onto the blockchain to unlock their liquidity and bridge the gap between traditional finance and digital finance.
Decentralized Physical Infrastructure Networks (DePIN): Using token incentives to enable global users to collaboratively build and operate physical infrastructure networks, such as 5G base stations and sensor networks.
The rise of these narratives marks a fundamental shift in the crypto industry from 'speculating on air' to 'investing in value.' Crypto venture giant a16z Crypto highlighted the potential of 'AI + Crypto' as the core engine of the next wave of innovation in its annual report. For retail investors, this means that the opportunities to discover value through in-depth research have greatly increased, and knowledge and cognition have become more important than mere boldness and luck in this market.
3. Survival rules for the new cycle: Patiently lay plans between the finale and the prelude.
We are at a crossroads of an era. The Fed's 'hawkish finale' is playing out, while the prelude to easing has yet to begin. For retail investors, understanding and adapting to the new rules of the game is key to navigating cycles and seizing golden opportunities.
1. A fundamental shift in investment paradigms.
From chasing hot spots to value investing: Abandon the fantasy of finding the 'next hundredfold coin' and shift towards studying project fundamentals, understanding their technology, team, economic models, and the competitive landscape they operate in.
From short-term speculation to long-term holding: In a 'value bull' market, true returns belong to those who can identify core assets and hold them long-term through volatility, rather than frequent trading short-term speculators.
Building a differentiated portfolio: In the new cycle, the roles of different assets will become more distinct. **Bitcoin (BTC)**, recognized as 'digital gold' by institutions, serves as the 'ballast' of the portfolio; Ethereum (ETH), with its robust ecosystem and ETF expectations, is a core asset that combines value storage and production attributes; while high-growth altcoins should be the 'rocket boosters' based on in-depth research and small position allocations, focusing on frontier sectors with real potential like AI and DePIN.
2. Stay patient and lay the groundwork early.
DataTrek's research reveals an interesting phenomenon: In the last 12 months of the tenures of the past three Fed chairs, even when interest rates remained high, the S&P 500 index averaged a 16% increase. This indicates that once the market is convinced that the tightening cycle has ended, risk appetite may recover even before rate cuts occur.
Such a 'running ahead' market could also emerge in the crypto space. While the market's attention is generally focused on the short-term game of 'when will rates be cut,' the true wise investors are already considering which assets and sectors will occupy the most advantageous positions in this future feast driven by macro tailwinds and industrial cycles when the prelude to easing finally begins.
Conclusion
This crypto cycle is undoubtedly an extreme test of retail investors' cognition and mindset. The era where one could easily profit with sheer boldness and luck has ended; a 'value bull' era that requires deep research, independent thinking, and long-term patience has arrived. This is precisely what makes it 'difficult.'
However, it is precisely in this era that institutional funds have flowed in at an unprecedented scale, providing a solid floor for the market; the value logic of core assets has become increasingly clear; and truly value-creating applications are beginning to take root. For those willing to learn, embrace change, and view investment as a journey of cognitive realization, this is undoubtedly a 'golden era' to compete with the top minds and share long-term growth dividends of the industry. History does not repeat itself simply, but it is always strikingly similar. Between the finale and the prelude, patience and foresight will be the only path to success.
