For crypto investors who experienced the magnificent bull market of 2020-2021, the current market is undoubtedly confusing and torturous. That was a carnival era ignited by global central banks' 'massive liquidity,' where liquidity overflowed, everything rose, and it seemed that investing in any project with closed eyes would yield astonishing returns. However, those days are long gone. Now, the global financial market hangs on a delicate balance: on one side are unexpectedly strong U.S. economic data, and on the other is the Federal Reserve's unwavering hawkish stance, with historically high interest rates acting like a mountain pressing down on all risk assets.
This paradigm shift driven by the macro environment has made this crypto cycle the 'toughest times' for retail investors. The old model of 'liquidity-driven, purely emotional speculation' has become ineffective, replaced by a 'value bull' market that places greater emphasis on intrinsic value, clear narratives, and fundamentals.
However, the difficulty also brings opportunities. When the tide recedes, true value investors will welcome their 'golden age.' Because it is in such an environment that institutional compliance entry, technological programmatic contraction, and real applications combined with the real economy will highlight their true, cyclical value. This article aims to deeply analyze this profound transition and clarify why this challenging time for speculators is precisely the golden road paved for prepared investors.
1. The toughest times: When the tide of 'massive liquidity' recedes
The difficulty of this cycle stems from the fundamental reversal of macro monetary policy. Compared to the extremely friendly environment of the last bull market characterized by 'zero interest rates + unlimited quantitative easing,' the current market faces the most severe macro headwinds in decades. The Federal Reserve has embarked on an unprecedented tightening cycle to curb the most severe inflation in forty years, bringing dual pressure to the crypto market and completely ending the old model of easy profits.
1. The macro data maze: Why interest rate cuts are far off
The key to unlocking the current market dilemma lies in understanding why the Federal Reserve has been reluctant to ease at the end of the rate hike cycle. The answer lies in the recent macroeconomic data—these seemingly 'good' data have become 'bad news' for investors hoping for easing.
Stubborn inflation and hawkish dot plots: Although inflation has receded from its peak, its stickiness is far greater than expected. The latest data shows that while the annual CPI for May in the U.S. was slightly below expectations, the core inflation rate remains stubbornly high at 2.8%.
This still represents a significant gap from the Federal Reserve's 2% target. This stubbornness is directly reflected in the Federal Reserve's latest economic projections (SEP) and the closely watched 'dot plot.' After the June meeting, Federal Reserve officials drastically lowered their expectations for interest rate cuts, reducing the median number of cuts for the year from three to only one. This hawkish shift severely impacted market optimism. As Powell stated at the post-meeting press conference: 'We need to see more good data to strengthen our confidence that inflation is continuously moving toward 2%.' In other words, the Federal Reserve's threshold for interest rate cuts has become very high.
A strong job market: Meanwhile, the U.S. labor market continues to show remarkable resilience. The non-farm payroll report for May showed that new jobs reached 139,000, beating market expectations, while the unemployment rate remained low at 4.2%. A strong job market means consumer spending is supported, which in turn brings upward pressure on inflation, making the Federal Reserve more hesitant about interest rate cuts.
Powell's 'historical script': As pointed out by Nicholas Colas, co-founder of DataTrek Research, current Chair Powell is following the script of his predecessors, adopting a hawkish tone in the final stages of his term to solidify his historical legacy of successfully curbing inflation. This consideration of personal and institutional reputation means that unless there is a dramatic decline in economic data, the policy shift will be extremely cautious and slow.
2. The 'gravity' of high interest rates: The 'bleeding' effect of crypto assets
This macro background has directly led to the difficult situation in the crypto market:
Liquidity exhaustion: High interest rates mean a reduction in 'hot money' in the market. For the crypto market, which heavily relies on new funds entering to drive prices up, especially for altcoins, the tightening of liquidity is its deadliest blow. The previously 'everything rises' situation has been replaced in this cycle by a 'sector rotation' or even a 'only a few hot spots' structural market.
Significantly increased opportunity cost: When investors can easily obtain more than 5% in risk-free returns from U.S. Treasury bonds, the opportunity cost of holding assets like Bitcoin, which generate no cash flow and have drastic price fluctuations, sharply increases. This has led to a significant outflow of funds seeking stable returns from the crypto market, further exacerbating the market's 'bleeding' effect.
For retail investors accustomed to chasing hot spots in a flood of liquidity, this change in environment is brutal. Strategies lacking in-depth research and purely following trends are likely to suffer severe blows in this cycle, which is precisely the core of the 'difficulty' in this cycle.
2. The golden age: From speculation to value, the emergence of new opportunities
However, the other side of a crisis is an opportunity. The macro headwinds act like a pressure test, squeezing out market bubbles and selecting truly long-term valuable core assets and narratives, thus opening an unprecedented golden age for prepared investors. The resilience of this cycle is precisely driven by several powerful endogenous forces independent of macro monetary policy.
1. The golden bridge: Spot ETF opens the institutionalization year
In early 2024, the U.S. Securities and Exchange Commission (SEC) historically approved the listing of a spot Bitcoin ETF. This is not just a product launch, but a revolution in the crypto world. It opens a 'golden door' for tens of trillions of dollars in traditional financial capital to invest in Bitcoin in a compliant and convenient manner.
Endless fresh water: As of the second quarter of 2025, the total assets managed by only BlackRock's IBIT and Fidelity's FBTC ETFs have surpassed hundreds of billions of dollars, with a sustained daily net inflow providing strong purchasing power to the market. This 'new water' from Wall Street has largely hedged against the liquidity tightening caused by high interest rates.
The stabilizing anchor of confidence: BlackRock CEO Larry Fink referred to the success of Bitcoin ETFs as a 'revolution in the capital markets' and stated that this is just 'the first step in asset tokenization.' This endorsement from the world's largest asset management company has greatly boosted market confidence and provided retail investors with a clear signal to follow institutional footsteps for long-term value investing.
2. The faith in code: Hardcore support under the halving narrative
The fourth 'halving' of Bitcoin in April 2024 reduced its daily new supply from 900 to 450 coins. This code-defined, predictable supply contraction is the unique charm that distinguishes Bitcoin from all traditional financial assets. Against a backdrop of stable or even growing demand (especially from ETFs), the halving of supply provides a solid, mathematical underpinning for Bitcoin's price. Historical data shows that Bitcoin's price has reached all-time highs within 12-18 months after the first three halvings. For value investors, this is not a gimmick of short-term speculation, but a reliable, long-term logic that transcends cycles.
3. The revolution of narratives: When Web3 starts solving real problems
The strong macro headwinds force market participants to shift from pure speculation to exploring the intrinsic value of projects. The core hotspots of this cycle are no longer baseless 'Dogecoins,' but rather those innovative narratives attempting to solve real-world problems:
Artificial Intelligence (AI) + Crypto: Combining the computational power of AI with the incentive mechanisms and data ownership of blockchain to create entirely new decentralized intelligent applications.
Tokenization of real-world assets (RWA): Bringing assets like real estate, bonds, and artworks from the real world onto the blockchain, releasing their liquidity and bridging the gap between traditional finance and digital finance.
Decentralized Physical Infrastructure Network (DePIN): Utilizing token incentives to enable global users to collaboratively build and operate physical world infrastructure networks, such as 5G base stations and sensor networks.
The rise of these narratives marks a fundamental shift in the crypto industry from 'speculating on air' to 'investing in value.' Crypto venture giant a16z Crypto emphasized the potential of 'AI + Crypto' as the core engine of the next round of innovation in its annual report. For retail investors, this means that the opportunities to discover value through deep research have greatly increased, and knowledge and cognition have become more important than mere courage and luck in this market.
3. New cycle survival rules: Be patient in laying out between the final chapter and the prelude
We are at a crossroads of an era. The Federal Reserve's 'hawkish finale' is being played out, while the symphony of easing has yet to begin. For retail investors, understanding and adapting to the new rules of the game is key to navigating cycles and seizing golden opportunities.
1. The fundamental shift in investment paradigms
From chasing hotspots to value investing: Abandon the fantasy of finding 'the next hundredfold coin' and shift to researching project fundamentals, understanding their technology, teams, economic models, and the competitive landscape of their sectors.
From short-term speculation to long-term holding: In a 'value bull' market, real returns belong to those who can identify core assets and hold them for the long term, transcending volatility, rather than frequent traders.
Building a differentiated investment portfolio: In the new cycle, the roles of different assets will become more distinct. **Bitcoin (BTC)**, recognized as 'digital gold' by institutions, is the 'ballast' of the portfolio; Ethereum (ETH), with its robust ecosystem and ETF expectations, is a core asset with both value storage and production attributes; while high-growth altcoins should be the 'rocket boosters' based on in-depth research and small position allocations, focusing on frontier sectors with real potential such as AI and DePIN.
2. Be patient and lay out in advance
DataTrek's research reveals an interesting phenomenon: In the last 12 months of the terms of the past three Federal Reserve chairs, even when interest rates remained high, the S&P 500 index averaged an increase of 16%. This indicates that once the market is convinced that the tightening cycle has ended, even if rate cuts have not yet occurred, risk appetite may warm up in advance.
This 'early bird' market could also appear in the crypto market. When the market's attention is generally focused on the short-term game of 'when to cut interest rates,' the true wise ones have already begun to ponder which assets and sectors will occupy the most advantageous positions in this future feast driven by macro tailwinds and industrial cycle resonance when the symphony of easing finally begins.
Conclusion
This crypto cycle is undoubtedly a limit test for retail investors' cognition and mentality. The era of easily profiting through courage and luck, the 'liquidity bull,' has come to an end. A new era that requires deep research, independent thinking, and long-term patience, the 'value bull,' has begun. This is precisely where its 'difficulty' lies.
However, it is precisely in this era that institutional funds are flooding in at an unprecedented scale, providing a solid bottom for the market; the value logic of core assets is becoming increasingly clear; real applications that can create value are beginning to take root. For those willing to learn, embrace change, and view investment as a journey of cognitive monetization, this is undoubtedly a 'golden age' to compete alongside the top minds and share in the long-term growth dividends of the industry. History does not repeat itself simply, but it is always astonishingly similar. Between the final chapter and the prelude, patience and foresight will be the only path to success.
