1. Exploration of Reasons for Market Crash


The day before yesterday, a warning was issued that the market might correct, and sure enough, Bitcoin plummeted, leading to nearly 300,000 people being forcibly liquidated, creating a grim scene. This plunge mainly stems from two major factors.

On one hand, the Federal Reserve's rate cut plans for next year are not promising, causing US stocks to suffer, and Bitcoin is also affected. On the other hand, Fed Chair Powell has stated he won't buy Bitcoin and has no intention of changing the law. However, both of these are short-term factors, and the market will soon digest them.

Of course, the fundamental reason is the Christmas correction, with trading and positions both declining!

(1) Bitcoin


Bitcoin has currently fallen to around 97,000. Given that this drop is largely due to news impacts, it is highly likely to fluctuate around 100,000 in the short term. If prices are favorable, consider buying in batches until around 80,000, but do not engage in contract trading. The current bull market for Bitcoin relies on ETF and funds from publicly listed companies represented by MSTR; however, despite the Federal Reserve's 25 basis point rate cut, the financial environment remains tight. Since September, long-term bond yields and mortgage rates have risen, and the dollar has appreciated, bringing macro risks to Bitcoin, as it is related to the contraction of global money supply, which is unfavorable for Bitcoin and other crypto assets, and the Fed's net liquidity continues to decrease.

(2) BNB


BNB rebounded quickly after a decline in the market, and it is expected to fluctuate around 700 in the short term. If a spot grid quantitative strategy is adopted, there may be profit potential.

(3) Ethereum


Ethereum (ETH) has declined more sharply than Bitcoin, with a weak rebound and a significant drop in funding rates. If it continues to decline, it may remain weak for a while. Its position in the cryptocurrency market is important, but this adjustment is constrained by various factors such as overall market sentiment and capital flow.

(4) Dogecoin


Dogecoin (Doge) has distinct characteristics, performing moderately when Elon Musk has not made any statements. Its price is highly dependent on the remarks of key figures like Musk, lacking an inherent stable value support system, and more often exhibiting speculative characteristics amid market fluctuations.

3. Macroeconomic Environment and Market Expectations


About a month before Trump's inauguration, the market generally expected inflation to rise after his taking office. Following the Federal Reserve's 25 basis point rate cut, Powell's hawkish remarks reduced expectations for two 25 basis point rate cuts by the Fed in 2025, far below previous expectations, even postponing the goal of controlling inflation at 2% to 2027, highlighting the uncertainty of inflation during Trump's administration. With Christmas approaching, the end of the 2024 fiscal year, and Trump's imminent inauguration, the capital market has shown some reactions, whereas this time window has historically been relatively quiet. Industry giant Arthur Hayes believes the cryptocurrency market will crash around January 20, 2025, around the time of Trump's inauguration, after which it may be a buying opportunity. In the foreseeable future, Bitcoin may fluctuate in the range of $80,000 to $110,000, similar to the oscillation state between $50,000 and $70,000 after March, until new events change the trend, such as black swan events, large-scale monetary easing, or strategic reserve asset transactions. Altcoins remain in a bear market; this is merely a rebound, and the fundamentals remain unchanged with no ecosystem, no new funds, and VCs continually unlocking and cashing out, alongside major platforms launching new coins, hindering the formation of a trending market.

4. Impact of Trump's Family Project WLFI

(1) Positions and Market Reactions


Inflation data exceeding expectations has alleviated rumors of fewer rate cuts from the Federal Reserve, and a rebound is expected on Wall Street after work resumes. Meanwhile, on-chain data shows that the Trump family’s WLFI has increased its holdings by 759 ETH, attracting attention. WLFI has been active recently, purchasing various tokens, such as ENA and ONDO, with many of its held tokens being driven by the 'Trump Effect', showing strong price performance. The non-stablecoin assets purchased include LINK, AAVE, ENA, and ONDO, half of which belong to top DeFi applications, and the other half to RWA assets. COW surged nearly 93% due to WLFI's purchasing behavior, and other purchased tokens also experienced varying degrees of price increases.

(2) Speculation on Potential Buy Assets


Speculating on WLFI's potential buying assets from three dimensions. First, the investment assets of Polychain, whose advisor Luke Pearson may promote the purchase of tokens from this portfolio; second, DeFi assets among the top hundred by market cap on Coingecko, considering volatility and drawdown, and possibly for future cooperation considerations; third, the listed assets of CowSwap (which have relatively minor impact). Overall, possible tokens include Maker (MKR), Uniswap (UNI), DYDX, etc. Additionally, from WLFI's holdings layout, it is clear that it prefers tokens with which it has cooperative relationships, clear business models, and stable actual yields, such as AAVE, LINK, ENA, ONDO, etc. Based on optimism about Ethereum's long-term potential, LDO, as the largest liquid staking protocol in the Ethereum ecosystem, is likely to gain attention; Pendle focuses on the yield splitting market, gaining market interest as relevant yields rise; UNI is the leading exchange in the DeFi track. If considering projects with high brand value but not in the Polychain investment portfolio, Lido, Pendle, Eigen, and Curve also have opportunities, while 1inch and Morpho may have a smaller chance post market cap expansion.

5. Analysis of Characteristics of Niche Cryptocurrencies


Taking ORDI as an example, although its market cap is not high, the liquidation volume is often comparable to that of high market cap coins like PEPE, XLM, PNUT, ARB, etc. This indicates a large number of people are going long on ORDI, with high market expectations and heavy positions. Similar to previous ETH, there are many optimistic views, but this also means its upward potential faces significant pressure, requiring the wait for bullish forces to adjust and alleviate position pressure before it can rise more favorably. Meanwhile, new coins launched in the past six months and old coins from three years ago have different performance characteristics and investment logic due to relative dispersion in attention and positions.


In summary, the cryptocurrency market is currently in a complex and volatile period, with both macroeconomic uncertainties and unique trends and opportunities for various projects and coins. Investors need to closely monitor market dynamics, make cautious investment decisions based on their risk tolerance and investment goals, especially amidst Bitcoin fluctuations, altcoin bear markets, and influences related to Trump, seizing good opportunities in spot investments and avoiding high-risk contract trading, in order to seek relatively stable returns and development amidst cryptocurrency volatility.