For crypto investors who experienced the grand bull market from 2020 to 2021, the current market is undoubtedly confusing and tormenting. That was an era ignited by global central banks 'pouring water,' where liquidity was abundant, and everything rose; it seemed that closing your eyes and buying any project would yield astonishing returns. However, those days are gone forever. Now, the global financial market hangs at a delicate balance: on one side, unexpectedly strong U.S. economic data; on the other, the Fed's unwavering hawkish stance, with the historically high interest rate environment weighing heavily on all risk assets.
This paradigm shift, driven by the macroeconomic environment, has made this crypto cycle the 'most challenging era' for retail investors. The previous model of relying on liquidity-driven, purely emotional speculation has become obsolete, replaced by a market that emphasizes intrinsic value, driven by clear narratives and fundamentals.
However, the other side of difficulty is opportunity. When the tide recedes, true value investors will usher in their 'golden age.' It is precisely in such an environment that institutional compliance entry, programmatic deflation of technology, and real applications combined with the real economy highlight their true, cycle-transcending value. This article aims to deeply deconstruct this profound transformation, explaining why this challenging era for speculators is precisely the golden path paved for prepared investors.
One, the most difficult era: When the tide of 'pouring water' recedes.
The difficulty of this cycle stems from the fundamental reversal of macroeconomic monetary policy. Compared to the extremely friendly environment of the previous bull market of 'zero interest rates + unlimited quantitative easing,' the current market faces the most severe macroeconomic headwinds in decades. In order to curb the most severe inflation in forty years, the Fed has initiated an unprecedented tightening cycle, bringing double pressure to the crypto market and completely ending the old model of easy profits.
1. The puzzle of macroeconomic data: Why interest rate cuts are far away.
The key to unlocking the current market dilemma lies in understanding why the Federal Reserve is hesitant to announce any easing at the peak of interest rate hikes. The answer lies in the recent macroeconomic data — these seemingly 'good' data have become 'bad news' for investors anticipating easing.
Stubborn inflation and the hawkish dot plot: Although inflation has retreated from its peak, its stickiness exceeds expectations. The latest data shows that the U.S. CPI annual rate for May was slightly below expectations, but the core inflation rate stubbornly remains high at 2.8%.
Image source: (MarsBit)
There remains a significant gap between this and the Fed's 2% target. This stubbornness is directly reflected in the Fed's latest economic projections (SEP) and the highly anticipated 'dot plot.' After the June meeting, Fed officials significantly lowered their expectations for rate cuts, reducing the median number of rate cuts for the year from three to just one. This hawkish shift heavily impacted market optimism. As Powell stated in the post-meeting press conference: 'We need to see more good data to bolster our confidence that inflation is moving steadily toward 2%.' In other words, the threshold for a Fed rate cut has become very high.
Strong job market: Meanwhile, the U.S. labor market continues to show remarkable resilience. The non-farm payroll report for May indicated an addition of 139,000 jobs, better than market expectations, while the unemployment rate remained low at 4.2%. A strong job market supports consumer spending, which in turn places upward pressure on inflation, causing the Fed to be more hesitant about cutting interest rates.
Image source: (MarsBit)
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 stages of his term 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 shift in policy will be extremely cautious and slow.
2. The 'gravity' of high interest rates: The 'bleeding' effect of crypto assets.
This macroeconomic backdrop directly leads to the difficult situation in the crypto market:
Liquidity exhaustion: High interest rates mean a reduction of 'hot money' in the market. For the crypto market, which heavily relies on new funds to drive price increases, especially altcoins, tightening liquidity is its most fatal blow. The once prevalent 'everything rises' phenomenon has been replaced by a 'sector rotation' or even a 'few hotspots' structural market.
Opportunity cost skyrockets: When investors can easily obtain more than 5% risk-free returns from U.S. Treasury bonds, the opportunity cost of holding cash flow-negative assets like Bitcoin, which have severe price volatility, sharply increases. This leads to a mass outflow of funds seeking stable returns from the crypto market, further exacerbating the market's 'bleeding' effect.
For retail investors accustomed to chasing hotspots amid an abundance of liquidity, this change in the environment is brutal. Strategies lacking in-depth research and merely following trends are likely to suffer significant blows in this cycle, which is the core reason for its 'difficulty.'
Two, the golden age: From speculation to value, the emergence of new opportunities.
However, the other side of crisis is opportunity. The macroeconomic headwinds serve as a pressure test, squeezing out market bubbles and filtering out core assets and narratives that truly have long-term value, thereby opening an unprecedented golden age for prepared investors. The resilience of this cycle is precisely driven by several strong endogenous forces that are independent of macroeconomic monetary policies.
1. The golden bridge: Spot ETFs open the institutionalization year.
In early 2024, the U.S. Securities and Exchange Commission (SEC) historically approved the listing of a spot Bitcoin ETF. This is not just a product launch, but a revolution in the crypto world. It opens a 'golden gate' for trillions of dollars in traditional finance to invest in Bitcoin in a compliant and convenient manner.
A steady stream of fresh capital: As of the second quarter of 2025, the assets managed by only BlackRock's IBIT and Fidelity's FBTC ETFs have surpassed hundreds of billions of dollars, providing strong purchasing power to the market through continuous daily net inflows. This 'new fresh water' from Wall Street largely counteracts the liquidity tightening caused by high interest rates.
The anchor of confidence: Larry Fink, CEO of BlackRock, called the success of the Bitcoin ETF 'a revolution in capital markets,' and stated this is just 'the first step toward asset tokenization.' This endorsement from the world's largest asset management company greatly boosted market confidence and provided 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 will reduce its daily new supply from 900 coins to 450 coins. This programmatically defined and predictable supply deflation is the unique charm that distinguishes Bitcoin from all traditional financial assets. Against a backdrop of stable or even growing demand (especially from ETFs), the halving provides solid, mathematically grounded support for Bitcoin's price. Historical data shows that Bitcoin's price has reached new all-time highs within 12 to 18 months after the previous three halvings. For value investors, this is not a short-term speculative gimmick but a reliable, cycle-transcending long-term logic.
3. The revolution of narratives: When Web3 starts to solve real problems.
The macroeconomic headwinds force market participants to shift from simple speculation to digging into the intrinsic value of projects. The core hotspots of this cycle are no longer baseless 'Dogecoins,' but those innovative narratives attempting to address 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 artworks onto the blockchain, releasing their liquidity and bridging the gap between traditional finance and digital finance.
Decentralized Physical Infrastructure Network (DePIN): Utilizing token incentives to enable global users to collaboratively build and operate a network of physical world infrastructure, such as 5G base stations and sensor networks.
The rise of these narratives symbolizes 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 for the next round of innovation in its annual report. For retail investors, this means significantly increased opportunities to discover value through in-depth research, where knowledge and understanding become more important than mere courage and luck in this market.
Three, the latest survival rules of the cycle: Stay patient between the final chapter and the overture.
We are at a crossroads of an era. The Fed's 'hawkish final chapter' is playing out, while the overture of easing has yet to begin. For retail investors, understanding and adapting to the new rules of the game is key to navigating the cycle and seizing golden opportunities.
1. Fundamental shift in investment paradigms.
From chasing hotspots to value investing: Abandon the illusion of finding the 'next hundredfold coin' and turn to researching the fundamentals of projects, understanding their technology, team, economic model, and the landscape of their sector.
From short-term speculation to long-term holding: In the 'value bull' market, true returns belong to those who can identify core assets and hold them long-term, navigating volatility rather than frequent trading short-term.
Constructing a differentiated investment portfolio: In the new cycle, the roles of different assets will become clearer. Bitcoin (BTC), recognized by institutions as 'digital gold,' serves as the 'ballast' of the portfolio; Ethereum (ETH), with its strong ecosystem and ETF expectations, is a core asset with both value storage and production data attributes; while high-growth altcoins should be seen as 'rocket boosters' based on in-depth research and small position layouts, focusing on cutting-edge sectors with real potential such as AI and DePIN.
2. Stay patient and plan ahead.
DataTrek's research reveals an interesting phenomenon: During the last 12 months of the tenures of the past three Federal Reserve chairs, even with interest rates remaining 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 warm up in advance, even before interest rate cuts occur.
This kind of 'preemptive' market may also occur 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 starting to think about which assets and sectors will occupy the most advantageous positions in the forthcoming feast driven by the macroeconomic tailwinds and industry cycle resonance when the overture of easing finally plays.
Conclusion
This crypto cycle is undoubtedly a supreme test of retail investors' cognition and mentality. The era where one could easily profit through courage and luck has ended; a 'value bull' era requiring in-depth 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 are pouring in at an unprecedented scale, providing a solid bottom for the market; the value logic of core assets is becoming increasingly clear; and applications that can truly create value are beginning to take root. For those retail investors willing to learn, embrace change, and view investment as a journey of cognitive realization, this is undoubtedly a 'golden age' where they can compete with the top minds and share in the long-term growth dividends of the industry. History will not simply repeat itself, but will always be surprisingly similar. Between the final chapter and the overture, patience and vision will be the only path to success.
This article is authorized for reprint from: (MarsBit)
Original title: (From 'Watering Bull' to 'Value Bull': Why this round of the crypto cycle is the most challenging yet also the golden age for retail investors?)
Original author: Luke, Mars Finance
‘The value bull is coming! Why this round of the crypto bull market is the most challenging but also the golden age’ was first published in ‘Crypto City.’
