The market has been relatively sluggish in recent days, fluctuating between $55,000 and $59,000. Since Bitcoin fell and closed below EMA200 last week (July 5), the market has changed significantly, and this break technically seems to indicate that the short-term upward trend since September last year has been broken. As shown in the figure below.
But we still retain the views expressed in Huali Huawai’s previous article: this bull market has not ended, the current market stage is more like a "bear trap", and the real bull market has not yet arrived.
Here we assume that EMA200 is used as a reference indicator, and breaking through the 200-day line is regarded as a "bull market" and falling below the 200-day line is regarded as a "bear market". Then we will find that since Bitcoin broke through EMA200 again in January last year (2023), it has also experienced a relatively long correction. For example, after falling below EMA200 in August last year, it experienced a correction of more than two months, and then rebounded again. As shown in the figure below.
Since October last year, Bitcoin has maintained a relatively good upward trend and has broken through ATH (historical high). But after falling below EMA200 again last week, many people did show panic and disappointment in the market. Judging from the current overall situation, the next adjustment may continue for a while (maybe until September). During this period, for ordinary retail investors, we only recommend that you do the following two things:
The first is that if you have not started building a position yet, or still have plans to build a position, then during this period you can consider buying and accumulating some Bitcoin in batches (note that it is in batches).
The second is that as Bitcoin enters a correction, the volatility of altcoins will become larger. Be careful to reasonably assess your own risk tolerance and only focus on those altcoin projects with strong narrative capabilities.
If you are already fully invested and are still considering whether to cut your losses and recover some of your principal, my personal opinion is that as long as you don’t hold the kind of stocks that may go to zero (or have already gone to zero) at any time, you might as well continue to wait patiently for 1-2 months and see how the situation develops.
Although there are many negative factors at this stage, such as the German government's sale of Bitcoin and MtGox's compensation, there are still some potential positive factors that we can keep an eye on, such as:
- The US presidential election. Judging from Trump's recent words and deeds, if Trump wins the US presidential election, it may lead to a sharp rise in cryptocurrencies. We will not discuss any additional political issues here.
- The Fed’s interest rate cut. Considering the current situation, it is only a matter of time before the Fed cuts interest rates. If the Fed can officially start cutting interest rates on September 18, then if we look at it a little longer, it is possible that all risk assets, including cryptocurrencies, will enter a new round of bull market.
- ETF inflows. ETF inflows have turned positive again in recent days, and major institutions such as Blackrock are still taking advantage of market panic to buy on dips.
As for what will happen in the next two months of correction, it is hard to determine at present, but from a technical point of view, Bitcoin is still a very strong support level at $50,000-52,000. If there is no new special event, it should be difficult to break below in the short term. But once it breaks below, the next range may be around $44,000-46,000.
I still say that if such an extreme situation as the above really happens, then don't hesitate, just continue to buy in batches. Maybe, when you look back at the current market in another year, you will feel the same as you do now when you look back at the market in August and September last year.
Compared to Bitcoin, which is currently undergoing a correction, although altcoins have fallen a lot, it is still possible that they may continue to experience a 10%-20% pullback in the next 1-2 months. That is why we said above that at this stage, we should pay attention to reasonably assess our risk tolerance and only focus on those altcoin projects with strong fundamentals and narrative capabilities.
In other words, in addition to core assets such as ETH and SOL, you can consider adding a few leading projects with popular narratives to diversify your investment portfolio. For example, under narratives such as AI, RWA, GameFi, etc., which you have always been very optimistic about but did not have the opportunity to buy, then you can take advantage of the recent sharp correction to accumulate some in batches.
Here we give a few examples from a technical perspective to help you find your direction (not investment advice):
For example: Ondo Finance (ONDO)
Ondo Finance is a project in the RWA field. It is currently incubating protocols that can support tokenized real-world assets and traditional cryptocurrencies. It is also the first project (company) to tokenize U.S. Treasury bond exposure. We introduced this project in the article of Hualihuawai in January last year (2023). Since the official launch of the project token ONDO in January this year (2024), the price has increased by about 10 times to the ATH. The current market value of the project is 1.435 billion US dollars, Market Cap / FDV = 0.14, Market Cap / TVL = 2.58. From the chart, around 0.85 seems to be a relatively good short-term support position, as shown in the figure below.
Of course, there will be a new round of large-scale unlocking of the project next year, which also needs to be paid attention to. As shown in the figure below.
Another example: Ronin (RON)
Ronin is a project in the GameFi field. It is an Ethereum sidechain built by Sky Mavis, the developer of Axie Infinity. It supports smart contracts and protocols compatible with EVM. We mentioned it in the article of Li Huawai in February last year (2023). The project token RON was launched in 2022. After a bear market, the price rose from a low of around 0.2 to 4.45 and broke through the historical high. It has now fallen back to around 1.9, and Market Cap / FDV = 0.34. Judging from the chart, it seems to have basically fallen to the bottom at this stage, as shown in the figure below.
Of course, the token is continuously unlocked, so don’t forget to use the Token Unlocks tool to monitor its real-time linear unlocking status.
The above are just two random examples. The main idea is to find projects that fit the popular narrative (or the track you are most optimistic about), have no major fundamental problems, and have basically reached the corrective action from the chart. But if your risk appetite is not that high, then when the new short-term trend of the market is still unclear, you can keep your existing position unchanged, and consider whether to add to your position when Bitcoin returns to the position above EMA200.
In short, we will remain optimistic about the development of the market in the long term, and we believe that the big bull market (the peak of this round of bull market) has not yet arrived. Moreover, I have not sold the 8-layer Bitcoin positions that I have invested in this round. If I start to sell, I will synchronize with everyone in the group as soon as possible. In the current stage of relative panic in the market, what you should do is not panic, but to maintain the necessary greed and be ready to buy at any time. Those who have not experienced darkness and challenges cannot usher in real light, and those who have experienced light will no longer be afraid of a new round of darkness and adjustments, because they believe that tomorrow's sun will continue to rise as usual.
Speaking of greed and fear, I just remembered that a few days ago, Boss Yu shared a small strategy based on FGI (Fear & Greed Index) in the group, as shown in the figure below.
Although many people know that there is such an indicator, I feel that not many people can really stick to long-term fixed investment based on this indicator, because most people's hearts hope to make a lot of money. The market is sometimes like a race between a tortoise and a hare. Many people seem to understand that the tortoise may win the race in the end, but most people will still choose to be the hare soon after starting the race.
The Fear and Greed Index is an indicator that reflects the sentiment of the crypto market, ranging from 0 (extreme fear) to 100 (extreme greed). If we look at historical data, we can clearly see that the index can almost reliably indicate the tops and bottoms of the market at different stages. When we compare the index with the price trend of Bitcoin, we can find that they are perfectly aligned, and the current FGI value is the same as the value in January last year (2023), which means that the current stage should be at the bottom range of the new round of market in this cycle (the redder the index, the closer the Bitcoin price is to the top, and vice versa). As shown in the figure below.
Having said the market trends of the past few days, let’s briefly discuss an old topic: Is cryptocurrency a Ponzi scheme?
Because a few days ago, I saw someone discussing whether cryptocurrency is a Ponzi scheme. In fact, this statement has never disappeared since the day Bitcoin was born. Regarding this issue, I personally will definitely not debate with anyone, and I will neither agree nor disagree.
Everyone has the right and freedom to speak, and it is not illegal to talk about whether cryptocurrency is a Ponzi scheme. You can certainly think so. But what I want to say here is that even if every cryptocurrency is a Ponzi scheme, so what? This statement can only prevent you from participating in cryptocurrency or influence people around you to participate in cryptocurrency, and it will not have any substantial impact on cryptocurrency itself.
I don’t think it matters whether cryptocurrency is a Ponzi scheme or not. What matters is how you choose wisely in a financial game.
For example, when the BRC-20 concept first appeared, there will always be a group of smart people (and lucky people) entering the market and forming the first batch of purchasing power. As retail investors discover and gradually enter the market, the earliest group of people may start planning to sell. Of course, this example is only a short-term thinking, which may bring considerable gains in the short term, or it may bring relatively large losses. Only those projects with good technology or community foundation (including KOL orders) may be able to break through the short-term limitations and continue to have a new round or several rounds of good performance in a longer time frame.
In addition to BRC-20, MemeCoin is also a good example. The popularity and performance of MemeCoin in this round have far surpassed the performance of many copycat projects, such as the representative PEPE, WIF, etc. Here we take PEPE as an example. I remember that in April last year (2023), the article of Hualihuawai mentioned the PEPE token, as shown in the figure below.
PEPE is actually more in line with our description above. When the coin was first born, only a small number of smart people (or lucky people) entered the market. However, as it became more and more popular on social platforms (such as X platform), more and more people (including many KOLs) paid attention to it. Thanks to the continuous growth of the corresponding community, after the first batch of people took profits, after a period of community construction (popularity accumulation), and with the start of the bull market, PEPE has re-entered a new round of larger-scale outbreaks, attracting many new investors. As shown in the figure below.
In short, building a strong community (worship of believers) around a token may turn it into a perfect investment tool. As for whether projects like PEPE and WIF are Ponzi schemes, from an investment perspective, it is actually not that important. When a new thing (including a concept) is born, the first thing we should think about is not to deny it right away, but to try to understand how it works and whether it may help us make money.
The birth of any new thing, in essence, is mainly due to people's hope, and hope is one of the strongest emotions of human beings. From this perspective, tokens (projects) that can give people more hope may even surpass those with good technological innovations at a certain stage of development. This is also one of the reasons why some MemeCoins with a strong community foundation can become popular. For example, in terms of market value, SHIB ranks ahead of Chainlink, and PEPE has surpassed many company-level projects such as Cosmos and Maker.
So, of course, you can look down on MemeCoin tokens that do not have any technological innovation, or even choose to ignore them directly, but if you are looking to invest and make money, then the key to thinking about such currencies should be: how to identify tokens that will have a strong community base in the early stages, and try to understand them. Of course, this process is actually quite difficult for newcomers, because sometimes they find it difficult to distinguish between a strong community and a pyramid scheme community, one step to "heaven", one step to "hell".
However, to prevent anyone from falling from one extreme to another, I have to say again that some tokens only have short-term hype value. You can use them to speculate or make money in a specific stage of development, but if you look at the longer term, only projects with good technology and vision will have a future.
This is where we share the content for this issue. This is also the 484th article updated by Hualihuawai.
