How to play during the transition period of a bull to bear to make money? The market indeed has a bit of a 'storm is coming' feeling, let’s break it down step by step, while discussing operational ideas and potential risks.
The characteristics of a bull to bear transition and the logic of shorting indicate that there are indeed signs of a bull to bear transition in the current market. U.S. stocks fell 5% on April 3, and continued to crash on April 4, with the Nasdaq down nearly 12%, just a step away from a bear market.
BTC is still holding around 80,000 dollars, but altcoins have already dropped out of steam, market makers are fleeing, and there’s a wave of delistings (over ten altcoins were delisted on April 4), liquidity is being drained, and retail investor confidence is about to collapse. Historically, the transition period from bull to bear is usually not a sharp cut, but rather a repeated fluctuation, like the dull decline in 2018, where BTC dropped from 20,000 to 6,000 over a whole year, with several rebounds in between.
What about this time? The tariff war (Trump raised tariffs on April 2, and China retaliated on April 4) has just begun, the shadow of global economic recession is getting heavier, and market sentiment is somewhat similar to 2018, but the rhythm may be faster. Shorting is definitely the mainstream thinking during a bull to bear transition. If BTC falls back to the ‘golden pit’ of 70,000-75,000, or even lower, like the black swan of March 12 (on March 12, 2020, BTC dropped from 7,900 to 3,800), it is not impossible.
The benefit of shorting is to go with the trend and earn quickly, especially in the contract market; with 10x leverage, a 20% drop can double your investment. But as you said, repeated fluctuations and expectations of interest rate cuts can increase the risks of shorting.
The March 12 incident was a combination of the pandemic and the circuit breaker in U.S. stocks; now, with two major drops in U.S. stocks (on April 3 and April 4) already sounding the alarm, the probability of the crypto market diving alongside a worsening global economy is not low.
The risk of shorting: interest rate cuts and liquidation. Traders are now betting that the Federal Reserve will cut rates four times this year (starting June, each by 0.25%). If Powell gives dovish signals in his speech tonight (April 5, Korean time), the market may rebound in the short term. Once expectations of interest rate cuts ferment, risk assets like BTC are likely to be pulled up, similar to the unlimited QE by the Federal Reserve after March 2020, when BTC rebounded from 3,800 to 19,000 by the end of the year.
If you misstep in shorting, for example, if BTC drops from 80,000 to 75,000 and you increase your short position, and then the interest rate cut news comes out pushing it back to 85,000, with 10x leverage you could face liquidation, leaving nothing behind. During the dull decline in 2018, there wasn’t this much external stimulus; this time, the tariff war and the crash of U.S. stocks could accelerate the decline, but the interest rate cut card could disrupt the rhythm at any time. Regarding the possibility of a repeat of March 12, I think the probability is not low, but the situation may be different.
March 12 saw a single-day drop of 48%, directly stunning everyone; the current market is weaker than it was then—U.S. stocks have had two circuit breakers (assuming April 3 and April 4 count as circuit breaker level drops), global economic recession, MicroStrategy holding 444,000 BTC (around 42 billion dollars as of December 23, 2024), if it can’t withstand selling, the dumping effect could be worse than March 12. There are rumors on X about institutional collapses (like FTX, Celsius in 2022), and the trust crisis of FDUSD has just started (it flash crashed to 0.8 on April 2), while Sun Yuchen is busy offering a reward of 50 million dollars for catching hackers (on April 4), this pool is murky.
Before March 12, there was a dull decline, this time it may be a dull decline plus a critical hit, and retail investors may go to zero before they even react.
Trading advice: make some small profits, don’t be greedy, short in the short term, play with a small position: BTC is fluctuating around 80,000 now, if the support level of 75,000 is broken, you can try to open a short position, but don’t go all in, set a stop-loss (for example, at 82,000), and aim for a swing of 5,000-7,000 dollars before exiting. Don’t use too high leverage on contracts, 3-5 times is enough to avoid liquidation.
Cash is king, waiting for the deep pit: given the state of the global economy, it’s not a dream for BTC to drop to 60,000 or even 50,000, keep some cash, wait for a crash to buy the dip in spot, like those who picked up chips at 3,800 during March 12 made a fortune.
Avoid altcoins, prevent going to zero: altcoins are now a minefield, liquidity is gone, market makers are not protecting them, touching them is a death sentence.
Shearing sheep and maintaining a stable mindset: no matter how cold the market is, airdrops are still appealing. The threat of MicroStrategy and institutional collapse, with 444,000 BTC being a ticking time bomb. If it sells off, BTC will immediately drop like a free fall; in 2018, there wasn’t such a large institutional holding, and March 12 didn’t pose this kind of threat.
It’s different now; if institutions can’t withstand debt pressure or shareholders push back (with U.S. stocks crashing like this), selling off will trigger a chain reaction. Coupled with the trust crisis of stablecoins like FDUSD, if institutional collapses (like Genesis, BlockFi) happen again, the crypto market could turn into a slaughterhouse.
In summary, making money during a bull to bear transition, shorting in the short term is a way, but don’t be greedy; repeated fluctuations and expectations of interest rate cuts can lead to total loss. A black swan event like March 12 could reoccur, even more intensely; given the global economy and the state of U.S. stocks, the crypto market is unlikely to be immune.
MicroStrategy's sell-off and institutional collapses are hidden dangers; retail investors need to be flexible and not resist hard. Take some time to grab some airdrops, secure profits on rebounds, and wait for big drops to pick up bargains, which is more practical than anything else. How low do you think BTC will drop? Do you have any operational ideas?