Source: Talking About Li and Huai
Ethereum has fallen from around $4,100 in December last year to about $1,700 in March this year, a drop of around 59% in just over three months. During this time, many who were originally optimistic about Ethereum gradually lost patience and became more and more disappointed and pessimistic...
However, after ETH rebounded to the $2,000 mark yesterday (March 19), it seems to have reignited some hope among certain individuals. Many who were stuck looked at the $2,000 Ethereum with desire and excitement, eagerly sharing the news with each other.
1. Is ETH going to rebound?
As for whether ETH can really rebound this time, I don’t know. Because currently ETH is still in a downtrend, let's focus on a few aspects for now:
The first aspect is the technical layer. We should first see if it can hold around $2,200 this month (March). If it can successfully recover and stabilize at this level, then perhaps we can have a chance to see higher prices next. Otherwise, just carry on as usual. Additionally, it is said that Standard Chartered's analysts have lowered their target for ETH prices in 2025 from the previous $10,000 to $4,000.
The second aspect is the information layer, such as the progress of the Pectra upgrade, the approval progress of ETF staking, the adoption rates of institutions (like continued accumulation of WLFI, opportunities in RWA applications), and the positive or negative impacts brought by the Ethereum Foundation and Vitalik personally, etc.
The third is the data layer, such as the inflow/outflow of ETF funds, the activity levels on the Ethereum chain, changes in the holdings of top addresses not on exchanges, etc.
As for the reasons behind the recent market rise, we won't do any hindsight analysis here. Currently, many reasons have already been summarized online, such as the macro reasons mainly being the signals released by the Federal Reserve early this morning (Beijing time March 20), which indicated that interest rates remain unchanged (as expected), but the pace of QT (Quantitative Tightening) will slow down, which the market sees as a positive signal. As shown in the figure below.
To put it simply, the Federal Reserve's interest rates being maintained at 4.25%-4.50% has already been digested by the market, but the balance sheet reduction is beyond previous expectations, which has reignited some confidence in the market and provided some motivation or reasons for the market to rise.
So, can we continue to buy Ethereum on dips now?
Currently, the price of ETH is at the level of October 2023, so many people might tell you that now is a good time to buy on dips since Ethereum has dropped 60% from its high of $4,100. But you also need to think about one more thing: if (this is just a hypothetical) ETH drops another 60% from -60%, can you accept that? If you can accept or bear this potential risk, then you can buy at any time now.
Since buying on dips is the strategy, this so-called ‘low’ may have different definitions for different people. What is your definition?
Many people anchor at the price of $4,100, so they believe that the current $2,000 Ethereum is low-priced. But if you anchor at Ethereum's lowest price of $800 in 2022, then the conclusion might be entirely different.
Selling at a high is actually a similar principle. If you believe that Ethereum will eventually reach $10,000, then what is there to be pessimistic about if you currently hold $2,000 worth of Ethereum or have an average cost of $3,000 for Ethereum?
Therefore, questions like (should I buy now, should I sell now) directed at others are actually not very meaningful. If you cannot find your anchor or strictly manage your positions (position management + risk management), then all your questions may be in vain, and others cannot provide you with the answers or results you need.
For me personally, I have always believed that as ordinary people investing in a field, we must form our own strategies or methodologies, such as:
- Even though I am optimistic about Bitcoin in the long term and adhere to a coin-based strategy, I still choose to take necessary profits during a bull market (that is, to sell a portion of my holdings in batches) to optimize capital efficiency and increase my long-term BTC reserves.
- Although from a technical or market perspective, I could quickly increase my earnings by leveraging, I still choose the slowest method of spot trading (only accumulating coins).
- Compared to spending over an hour every day staring at the market, I prefer to spend 10 minutes each week to quickly look at the market, and then devote the remaining time and energy to things I like to do, rather than exhausting myself with frequent trading or getting stuck in trading.
- Always keep yourself in this field, always have the chips to stay at the table, is easier to succeed than leaving all your chips on the table for a big gamble. Only those who persist until the end can have a higher probability of achieving results.
- Do not let yourself fall into extreme survivor bias. We often hear about people getting rich overnight, but rarely hear about the thousands who tried to do the same and went bankrupt.
- In fact, in investing, most people tend to overestimate what they can achieve in a year while underestimating what they can achieve in ten years. If you can reasonably formulate a ten-year plan and stick to execute it in phases, I believe you will definitely outperform most people.
2. Trump urges the Federal Reserve to cut interest rates.
We mentioned QT earlier. If we look back at history, we can find that since the Federal Reserve launched QT in 2022, it has been withdrawing hundreds of billions of dollars from the market each month. Now (starting from April 1), the scale of balance sheet reduction will fall from $25 billion to $5 billion, which from a certain perspective means that the Federal Reserve's monthly withdrawal amount has sharply decreased by four-fifths, effectively re-injecting some liquidity into the market (if we compare rate cuts to a strong medicine, then QT can be seen as a tonic).
And today (March 20), there is another interesting thing, that is, Trump tweeted on Truth Social (a social platform similar to Twitter under Trump Media & Technology Group) urging a rate cut. He believes that with the adjustment of tariff policies, the US economy will need lower interest rates to adapt to these changes. As shown in the figure below.
Regarding Trump's interest rate cut scenario and the potential impact of the Federal Reserve's rate cut on the crypto market, we have already sorted out and introduced some points in previous articles (such as those on March 16, March 12, March 11, etc.), so I won’t elaborate further. Interested friends can refer back to previous articles in ‘Talking About Li and Huai'.
3. Continuing to discuss the issue of investment styles.
Next, we will continue to discuss the issue of investment styles based on the previous article (March 17):
A few days ago, I saw a message from a friend in the background asking: Can we still hold UNI?
When I saw this comment, my first reaction was to simply copy the response to the same question I had answered a few days ago and reply to this friend with my thoughts. However, I found something interesting: the friend who raised the above question had already asked me this question before, and upon checking their comment history, I discovered that regarding the UNI issue, they had repeated their inquiry to me 8 times in the past six months. As shown below.
It can be clearly seen that this friend has likely been stuck with UNI for a long time, and may have become somewhat pessimistic over the past six months. Besides leaving comments in ‘Talking About Li and Huai’, they might also be asking the same question under many other bloggers' posts, but still not getting the desired results.
To be honest, if faced with problems (losses) and not reflecting, summarizing, and reviewing oneself, but instead trying to seek help from others (strangers), hoping they can provide a perfect result and relying on others to change their fate directly, this is actually very difficult.
Everyone is chasing money and likes to pursue wealth, but some people seem to struggle to understand a basic principle or logic: chasing money is not the most important thing; what matters is developing certain (or several) money-making habits that are suitable for oneself.
Many people are only focused on making a quick profit or betting small to gain big, and they hope to build this goal more on the help of others (like some KOLs, bloggers, etc.). However, what others do and what you should do are completely different concepts. We have mentioned this issue multiple times in previous articles, for instance, different individuals have significant differences in background, experience, and risk tolerance, and each person's thought model, knowledge experience, observation perspective, and interests are also different.
Others' investment strategies may not necessarily be suitable for you. The best approach should be: by learning and understanding others' investment ideas or logic, and then on that basis, combining your own situation to derive your own investment methodology or system.
Moreover, in this process, we need to avoid being overambitious. For instance, in the crypto field you are interested in, if you want to stay ahead, you need to continue learning (learning + notes + thinking) during the investment process. Learning can be achieved through many ways or channels, such as:
- Some people like to follow a bunch of bloggers on Twitter and then scroll through various messages every day.
- Some people like to join various chat groups and then scroll through various messages every day.
- Some people like to leave comments everywhere, asking various questions.
- Some people prefer to directly use tools like ChatGPT to get one or a few answers.
- Etc……
Regarding how to effectively learn this matter, I remember in previous articles of ‘Talking About Li and Huai’, I also sorted out some personal experiences or methods, and I won't elaborate further. Here, I just want to remind one important point: any news must be checked and verified as necessary; do not trust casually upon seeing it.
The purpose of investing is to make more money, but you must learn to make your money work for you, rather than becoming a slave to money. In any investment field, no one will lead you to wealth for no reason, and the market's money will not just wait there for you to reap. We must pursue strategies that are suitable for us and correct for ourselves, whether it's spot trading, contracts, airdrops, IPOs, arbitrage... or any other type of strategy you can try. However, during the participation process, you must think clearly: in a PvP game, what makes you (or what unique method do you have) able to earn money from others?
Here, the so-called unique methods can be divided into two types:
One is a unique strategy (a small number of people have it, most do not), and this uniqueness is mainly reflected in scarcity and leading edge. For instance, if you develop a set of indicator systems, you can probably accurately judge market trends and thus gain an advantage. Alternatively, you could obtain differentiated news faster than others, filter effective information from a massive amount of data more quickly, or you have a lot of traffic that can be used for trading calls, and so on.
One is general strategies (most people have, a few can execute), and this uniqueness is mainly reflected in psychological and cognitive advantages. For example, seasoned investors advise you to dollar-cost average into Bitcoin at lower prices and hold on, patiently waiting for good returns. Yet, you might still hesitate to invest in various altcoins or directly exchange your originally purchased Bitcoin for various altcoins, believing that altcoins will surge more and yield faster returns.
In short, many times, some people, after seeing others' brilliance, always hope to directly possess it, neglecting their true selves. In any investment field, merely trading is not enough (for example, buying whatever others tell you to buy, or buying whatever you hear is popular). We need to learn to create and form our own unique methods. For ordinary people, most find it hard to succeed easily after entering a new field. The initial attempts may fail, but failure often means gaining more experience than others. How to effectively utilize one's experience (and learn from others' methods) to establish one's own investment methods is the correct way to accumulate wealth.