Is now the time to rush to buy the dips?

Although the market implied volatility is currently at a low level, it has been on an upward trend in recent years. This shows that market sentiment is beginning to become more unstable. Although panic has not yet occurred, irrational emotions are likely to spread.

The opportunity to buy the bottom (the real bottom, but extremely difficult) comes after the real panic occurs

When there is a real panic in the market, prices tend to fall significantly below the intrinsic value of the asset. This is the best time for bargain hunters to exit, as they can buy high-value assets at very attractive prices. Investors should remain calm and wait for further developments in the market to seize the real bargain hunting opportunities.

Specific reference to several time nodes of Bitcoin

March 2020 -33%, Implied Volatility 190

Bitcoin Performance: In March 2020, the price of Bitcoin fell to a low of around $4,000. The crash became known as “Black Thursday,” as Bitcoin plunged more than 50% from a high of around $9,000 in just a few days.

Bottom-picking signal: Despite the panic in the market, the plunge also provided an excellent opportunity for bottom-pickers. As governments and central banks around the world launched massive economic stimulus plans, Bitcoin rebounded rapidly in the following months, recovering and breaking through the all-time high of $20,000 by the end of the year.

May 2021 -45%, Implied Volatility 160

Bitcoin Performance: In May 2021, the price of Bitcoin fell to a low of around $30,000. The plunge was about half of Bitcoin’s value from its all-time high of nearly $65,000 in April.

Bottom-picking signal: Despite the panic selling in the market, bottom-pickers and long-term investors quickly stepped in, believing that the long-term prospects of Bitcoin remained optimistic. Subsequently, the price of Bitcoin gradually recovered and broke through the $60,000 level again by the end of 2021.

June and November 2022 -22%, implied volatility 110

Bitcoin Performance: In November 2022, the price of Bitcoin fell to a low of approximately $16,000. The plunge reflected a significant blow to market confidence in the crypto industry, especially a crisis of confidence in some major trading platforms.

Bottom-picking signal: Despite this, some investors believe that this is a great entry point for long-term holding of Bitcoin. As the market gradually digested the negative news, the price of Bitcoin stabilized in the following months and showed some signs of rebound.

July 2024 -8%, implied volatility rises to 57.5, bottom-fishing still needs to wait

Although the current market implied volatility has increased, it has not yet reached the level of real panic. Investors should pay close attention to market trends, and large funds entering the market need to wait for more obvious panic signals to appear before bottom-fishing operations.

The plunges at the above time points and the subsequent bottoms have provided investors with valuable lessons. But to be honest, in the market like 312 and 5119, most people would not dare to enter the market even if they were given the opportunity, thinking that they would return to zero.

Short-term market fluctuations should not affect the assessment of the long-term value of Bitcoin. Calm investors who wait for panic selling to occur can often find undervalued assets and get rich returns when the market recovers.

The main reason for this round of downward trend is the shipment of Mt.Gox and various governments, but the market may have exaggerated the impact it has brought.

Mr. Market is sometimes slow, so slow that real news will not ferment in the first place; but sometimes it is sensitive, as sensitive as a frightened bird, thinking that it is "powerless" at the slightest sign of trouble. But in fact, "the most important factors affecting future market trends are the results of the US election and the expectation of the Fed's interest rate cut."

There are about 24 days until the next Federal Reserve interest rate meeting (2024.08.01)

Therefore, for market participants, including retail investors and institutions, the best option now may be to switch from "long-term thinking" to "short-term thinking", and perform operations within 6 hours, or even 4 hours or 2 hours, and be more inclined to trend trading, rather than overly worrying about questions that have no fixed answer, such as "Is there a bull market in Bitcoin and the market as a whole?"

To sum it up, it can be summed up in 16 words - recognize the situation, give up illusions, operate in the short term, and wait for good news.

In simple terms, long-term investors can stay put, and there is no need to rush to invest in large funds unless there is a sharp drop. However, it is a good choice to enter a base position at present, or those with a light position can add some positions appropriately. If there is a short-term advantage, exit first. Now the market is not clear, so if there is a profit, exit first to protect the profit. If the market reverses, you can enter the market at an appropriate time.

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