This recent correction in the crypto market has been quite sharp, with Bitcoin retreating from its highs and Ethereum also facing significant selling pressure. This is the result of multiple factors, including the macro environment, policy expectations, and market structure.
This correction has also exposed some vulnerabilities within the crypto market:
Liquidity concerns for altcoins: When panic hits the market, funds first flee from altcoins to Bitcoin or stablecoins in search of safety, leading to altcoins falling far more than mainstream coins, with liquidity shrinking sharply.
The gap between retail investors and whales: On-chain data shows that addresses holding over 1,000 BTC accumulated about 18,000 Bitcoins during the crash. However, many retail investors cut their losses due to leveraged liquidations or panic, resulting in a situation where 'retail sells, whales buy.'
How do we see the future?
Key points for short-term trends
Key support for Bitcoin: Currently, it is crucial to closely monitor whether the range of $110,000 to $112,000 can form effective support.
Ethereum's test: ETH needs to cope with potential selling pressure from a large number of validators exiting and waiting for redemption. Its performance around the $3600 to $4000 range is worth paying attention to.
Pay attention to macro trends: Focus on the Federal Reserve's statements at the Jackson Hole annual meeting (expected at the end of August); any hints regarding interest rates could trigger market fluctuations.
The long-term logic has not changed
Despite short-term pain, the long-term logic supporting cryptocurrencies has not collapsed:
Institutions are still positioning: Institutions like BlackRock (IBIT) are still increasing their Bitcoin ETF holdings, and the Norwegian sovereign fund is also adding to its position, indicating long-term confidence remains.
Technological and ecological development: Technological upgrades of mainstream public chains (such as Ethereum's continuous expansion) and the development of ecological applications are still advancing, which is the basis of value.
Global liquidity cycle: Historical data shows a high correlation between global M2 money supply and Bitcoin prices. Once the Federal Reserve enters a rate-cutting cycle in the future, additional liquidity may still pour into the crypto market.
What should ordinary people do?
In the face of market fluctuations, here are a few suggestions for your reference:
Respect leverage: High leverage is the root cause of this liquidation tragedy. In the highly volatile crypto market, using leverage requires extreme caution, or even better, to avoid it altogether.
Consider phased positioning: If you are optimistic about long-term value, consider buying spot in batches near key support levels (like BTC approaching $110,000, ETH around $3600), and avoid going all-in at once.
Prioritize core assets: During times of high market uncertainty, prioritize allocating core assets like Bitcoin and Ethereum, which are relatively more resilient. Be especially cautious with altcoins due to their greater liquidity risks.
Long-term perspective to cope with volatility: For long-term investors, each deep correction may be an opportunity to position. The cyclical fluctuations of the market have never stopped, but the long-term trend of core assets remains promising.
Final summary:
This recent correction in the crypto market is the result of multiple factors, including macro uncertainty, unmet policy expectations, high leverage liquidations, and specific pressures on ETH. It acts like a 'stress test,' exposing the market's own vulnerabilities, especially the liquidity risks of altcoins and the enormous dangers of leveraged trading.
The market will always fluctuate; 'the opportunity to drop is always more tangible than the risk of rising.' The word panic has another meaning, 'fear,' but often, Panic is not a strategy. Staying calm and rationally analyzing the situation is key to better cope with future markets.
