Why should you not easily attempt to short?

I will discuss this issue from the perspective of market makers and liquidity.

1. Viewing market rhythm from the perspective of market makers

Between April and September 2024, the main task of most market makers and project parties is "accumulation," which means channeling chips in the market into their hands through various means. During this phase, altcoins and VC coins are particularly typical.

Currently, this accumulation phase is basically complete, and the next main goal is to "distribute chips." The core purpose of distribution is to guide users to buy these chips by driving up prices and market enthusiasm, transferring chips from market makers/project parties to the market.

This market logic implies that, in the early stages of chip distribution, prices usually rise, and recklessly shorting will face enormous reverse pressure.

2. Analyzing the current market environment from a liquidity perspective

Liquidity is the core driving force behind market rises, and several recent macro factors are improving liquidity expectations:

a. Market confidence brought by election results: After Trump's victory in the election, the market's attitude towards crypto assets has clearly turned positive. The asset attributes of BTC have been further upgraded, and a crypto-friendly narrative is expected to dominate the next four years.

b. Easing of compliance pain: This year's compliance pressure has gradually eased, and the market has a clearer outlook on future regulatory prospects, providing policy space for the rebound of risk assets.

c. Improvement in expectations of the Federal Reserve’s net liquidity: Currently, the Federal Reserve's net liquidity is low, and a rebound in liquidity in 2024 is almost a high-probability event. This constitutes potential benefits for all equity assets such as US stocks and the crypto market.

Based on these factors, attempting to short a market that is in an upward trend is tantamount to going against the trend, which poses significant risks.

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If you must short, how should you operate?

1. Clearly define the trading plan to avoid blind operations

Before opening a short position, the following points must be clarified:

Position logic: Is the purpose of this short position to hedge risk or to try to catch the top?

Stop-loss setting: Clearly define the stop-loss point to avoid massive losses due to rapid market rebounds.

Take-profit target: Be clear about your expected target, and do not be greedy.

2. Prefer hedging rather than net shorting

During an upward cycle, shorting should be more inclined towards hedging against spot positions.