🥀What should we do if there's a pullback today? Let's take a look at the operations of on-chain king 0xsun!
1️⃣ Today's Market Review
The cryptocurrency market has experienced a significant drop today, with Bitcoin falling below $116,000 and Ethereum losing ground at $3,700. Most altcoins have seen substantial declines.
Macroeconomic Headwinds: Trump signed an executive order imposing tariffs of 15%-41% on goods from 67 countries, and Powell's speech yesterday hinted at a reluctance to cut interest rates, leading to macroeconomic headwinds.
Profit-Taking: After Bitcoin's four-month rise, contract open interest has reached a new high (over $46 billion), and high-leverage long positions were liquidated, causing a cascade effect.
2️⃣ 0xSun's Hedging Strategy and Logic
On August 1st, Smart Money and crypto KOL 0xsun.sol (@0xSunNFT) posted on social media indicating that there is currently a severe divergence in the market, and they have opened a hedge trade (going long on ETH & shorting a basket of altcoins) with a position roughly at 1:1.
The logic behind going long on ETH is that ETH is the main driver of this round of price increases at the end of June, as institutions follow MicroStrategy by purchasing ETH through crypto-equity financing. In the stablecoin narrative, ETH is also a core infrastructure and settlement layer. Referring to MicroStrategy's previous purchase of BTC, which drove prices up significantly, most altcoins did not rise as much as Bitcoin. The funds that crypto-equity institutions use to buy ETH are also unlikely to spill over into other altcoins.
According to CMC data, in the past 30 days, only 20 of the top 200 tokens have outperformed ETH, including BONK, ZORA, CFX, and ENA, which are clearly driven by favorable events.
Altcoins follow the previous short-selling logic, prioritizing those with relatively high market caps, non-leading positions, weak performance, and low presence, while diversifying shorts and setting stop-loss orders to prevent any single asset from surging.
0xsun further stated that if the market continues to rally in the second half of the year, it is highly likely that ETH will continue to drive the market. If the market enters a bear phase, they do not believe that altcoins can stand alone, whereas ETH at least has institutional buying power to support it. The situations that would invalidate this hedging thought are either a true altcoin season where most altcoins consistently outperform ETH or a scenario where ETH stagnates or leads the decline while other altcoins do not drop much. Based on experiences from the past few months, they believe the likelihood of this is low.