Author: Mercury
Translated by: Deep Tide TechFlow
Market Rotation: An Opportunity for Wealth Growth
In any market, especially in the crypto market, rotation is a rare opportunity. It allows you to transfer profits gained from strong assets to underperforming assets, achieving compounding growth of wealth.
However, the key to success lies in understanding the concept of 'relative strength.' Only when you have gained enough profits from strong assets can you have the capital to rotate. This is also the core of this article:
When the market is in a phase of high prosperity, many tokens perform well (like now), and the rotation choices in this situation may seem dazzling.
But this is actually a good thing.
Because there are more tokens worth paying attention to in the market at this time;
And the 'attractiveness' of these tokens will also become more prominent.
Taking $SOL and $AVAX as examples
We can observe this rotation phenomenon through the performance of $SOL and $AVAX:
When SOL broke through an 8-month consolidation range, AVAX had not even reached a higher high.
After SOL broke through the range, it slowly rose by 15%. Meanwhile, AVAX soared by 45% during the same period.
Then, both entered a consolidation period after reaching a local peak. During this time, SOL led the market again, rising 30% and reaching a new all-time high (ATH).
When SOL reached a new high (and peaked locally under unknown circumstances), AVAX formed a higher low and subsequently rose by 45%.
Now, when AVAX reaches a new higher high again, SOL pulls back to the trend support level of higher time frames (HTF).
The 'Ping-Pong Effect' of Rotation
This phenomenon is like a ping pong ball, switching back and forth between two assets:
One asset rises strongly while the other stagnates;
Sometimes they rise gently together;
Sometimes they solidify together.
However, those striking large fluctuations—which make you start to pay attention and spark discussions on social media about a token's volatility—often occur when another token is stagnating or pulling back.
The Attention Economy of the Market
For those who do not have a deep understanding of market dynamics or have not established a clear trading system and strategy, the changes in the market can be overwhelming.
You may encounter a situation where you sell your position at AVAX's local low, switch to buying SOL, but then SOL pulls back while AVAX starts to surge, or vice versa.
In trading, patience often pays off. If you can find a suitable position at the low of higher time frames (HTFs), you should try to avoid frequent rotations.
In simple terms, the market transferring funds from one sector or token to another does not mean you need to follow suit.
In fact, very few people can successfully capture all the significant upward trends of SOL and transfer all funds to AVAX at the right moment to maximize profits. This 'perfectionism' rarely works in trading.
Instead of pursuing extremes, it is better to pay attention to both. From the market background, the performance of SOL and AVAX in higher time frames is optimistic.
For example, SOL is breaking through an 8-month consolidation range and is expected to continue the upward trend, entering a price discovery phase.
Meanwhile, AVAX just broke a downtrend that lasted for 6 months a few weeks ago and recently successfully broke through a range high that had lasted for over a month.
Overall, there is no absolute right or wrong between the two. Perhaps when SOL pulls back to the trend support level of higher time frames (see the first chart), AVAX is approaching the $55 resistance level.
Alternatively, when SOL continues to rise after testing support in the next few days or weeks, AVAX may pull back from its resistance.
In this case, the profits you make from one token can serve as liquidity to look for new opportunities or to increase your position in another token—this is the actual meaning of 'rotation' in similar scenarios.
The key is that both show relative strength compared to the overall market, while most of the market is still in a downtrend or without significant volatility.
How many tokens are currently returning to multi-month ranges or breaking through the trends of higher time frames? While there are indeed dozens, it is far from the stage of 'buying blindly with your eyes closed will make money.'
Therefore, rather than focusing excessively on short-term small rotations, it is better to patiently wait for the entry points of both, or use small rotations at key turning points to rebalance positions.
Finally, it should be noted that this is just a very small case of rotation.
When we discuss rotation, different time frames may lead to different interpretations of the concept.
Rotation can be small-scale, like the previous example; it can also be large-scale, such as tokens that have stagnated for two years suddenly starting to rise significantly, and we are just beginning to see the signs.
However, whether it is a large rotation or a small rotation, the core logic is consistent, just differing in the range and degree of impact.
I might write a second part about rotation later, but that's all for today—I’m tired.
I hope this article is helpful to you.
