The past week has seen historic volatility in the cryptocurrency market, including massive liquidations and subsequent dramatic rebounds. Here’s a detailed analysis of the events and what to expect going forward.
1. Causes of the crash
The crash was triggered by a series of macroeconomic and geopolitical events. The Trump administration's re-introduction of aggressive tariffs, especially tariffs on US coal, liquefied natural gas, and crude oil, has shaken global markets, especially risky assets such as cryptocurrencies. This policy has triggered large-scale liquidations, leveraged positions have been forcibly closed, exacerbated downward pressure on the market, and highlighted the fragility of markets that rely on leverage.
2. Rebound: A reflection of extreme volatility
After the market collapsed due to liquidation pressure, the news that the United States, Canada and Mexico reached a temporary tariff suspension agreement was released, and the market rebounded quickly. Bitcoin soared from $91,000 to $102,000, and altcoins fluctuated more violently, with some rising by more than 30%. This volatility shows that the current market is more driven by news than fundamentals.
3. Future Outlook
Although the worst of the downturn may be over, the market is unlikely to rebound quickly in a V-shape. It is expected to enter a consolidation period, and price fluctuations may remain volatile as the market waits for new catalysts.
4. Key Observations
Altcoin structure is weak: Many altcoins are facing continued selling pressure, especially from retail investors who reduce their positions after losses.
Retail sentiment: Retail traders tend to be risk-averse after major losses, dampening demand for speculative assets.
Sensitivity to news: Markets are highly sensitive to geopolitical events, particularly U.S.-China trade relations and monetary policy changes.
5. Cryptocurrency categories that may rise
Despite the resistance, the following sectors are showing relative strength and could lead the next rally:
Real-world asset (RWA) tokens: such as ONDO and CHEX, demonstrate the resilience of tokens backed by physical assets.
AI-driven crypto projects such as VIRTUL have demonstrated strong fundamentals and user growth.
Decentralized Finance (DeFi) Protocols: Projects with robust revenue models and strong community support are likely to outperform.
Infrastructure tokens: such as SOL, HBAR and HYPE, have shown resilience and may benefit from the recovery in risk appetite.
Selected meme coins: such as PEPE, which have strong community support and may recover in the bull market.
6. Actionable investment strategies
A four-step plan to optimize your cryptocurrency portfolio:
1. Cut back on underperforming assets: Reduce exposure to projects that you no longer like, especially those that have failed to recover in a rebound.
2. Concentrate investment on high-conviction projects: Focus on projects with strong fundamentals and clear application scenarios, and diversify investments in areas such as RWA, AI and DeFi.
3. Maintain adequate stablecoin reserves: Allocate 20% to 35% in stablecoins to cope with market pullbacks or emerging opportunities.
4. Be patient and strategize: Enter new positions at major liquidation events or when trend reversals are confirmed, and avoid chasing highs and selling lows.
