As expected, there are many crashes in the bull market. Although the big crash that we longed for came late, the strength and lethality of the fall are still as strong as before. On the 6th, the contract liquidated 1.5 billion US dollars, and on the 10th, the contract liquidated 1.7 billion US dollars. The liquidation volume of tens of billions of RMB is only seen in the big bull market. On the 6th, BTC quickly plunged, but the altcoins did not fall much. On the 10th, the altcoins were the main ones. Since ETH is still linked to the altcoins in this round of trends, I use ETH's K-line to represent the altcoins, and the amplitude of different altcoins will be magnified according to their respective situations.
By comparing the above BTC and ETH price candlestick charts, we can clearly feel that the decline in the past two days is a premeditated targeted liquidation by the main force. The 6th was for BTC, and the 10th was for the altcoin. So, before these two declines, were there any signals in the market?
The most intuitive data signal is the change in funding rate. Before the BTC spike, BTC's funding rate soared to 50%-70% (0.05%/8 hours), which was almost the craziest time of this round of market, but before the decline, the rate began to decline. In the same situation, before the Shanzhai spike, due to the good market sentiment, the funding rate was very exaggerated. I could get almost 100% annualized return on the Shanzhai position in arbitrage (for fee arbitrage, you can read my homepage article), but on the day before the decline, the fee suddenly plummeted. By the evening, almost half of the Shanzhai fell to the regular 0.01%/8 hours.
Matching the market situation: BTC broke through 100,000 several times and then fell back. The overall price continued to fall slightly. Then, before the crash, at 10:45 pm, there was a short-term pull-up. BTC slightly broke through 100,000, pushing the market's bullish sentiment to a climax for the last time, and then started the official crash.
Looking back, this is the performance of the main force constantly accumulating short orders! The purpose is to prepare for the plunge in the early morning. The principle is that only when the main force opens a large number of short orders will the funding rate be lowered, and it will be a rapid decline in the short term.
The above is a micro-analysis of this crash, that is, a prediction and judgment accurate to the day, which can be used as a basis for judging future market conditions. On a macro level, it is even more obvious.
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Musk called for DOGE, and the trading volume of DOGE exceeded the BTC price but did not make a significant breakthrough, resulting in a divergence between volume and price!
I started to warn of the risks, but the comment section felt that it was not over yet and criticized me for missing out on the bull market and that market sentiment was overheated.
The $100,000 mark was not taken all at once, and companies such as MicroStrategy are still buying big, but the supply of funds has not brought about a significant price breakthrough, and BTC is stagnant. The mainstream sectors have risen significantly, DeFi has almost doubled in the short term, and some of the cottage sectors have risen, and market sentiment is ready to move.
The market began to look forward to the copycat season, but some experienced big investors around began to liquidate their positions and leave the market one after another.
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In general, this wave of plunge is traceable and within expectations, especially when BTC has already hit the pin, which is equivalent to giving us a warning. Although I have made sufficient risk warnings, since I really don’t know where the bull market will top out, I can only take profits in batches at highs. I have currently taken profits on almost half of my positions.
The purpose of reviewing is to make better operations next time. So, besides selling in advance, what opportunities are there when the market crashes? Here are two ideas.
The first one is to move bricks during a sharp drop.
Due to the short-term rapid decline in prices, there will be price differences between the on-chain, contract, and spot markets due to the untimely response of the pool and counterparties. Reverse arbitrage between futures and spot markets mainly occurs in some DEXs, such as hype, aveo, and drift. Because the arbitrage robots are not timely, there are opportunities when the market plummets; some occur in second-tier exchanges, because the spot price does not respond in time, and the positions can be closed; arbitrage on the chain requires the preparation of coins.
For example, this time I prepared RAY and several SOL altcoins in advance, but found that the on-chain price of RAY responded very quickly, and there were automatic brick-moving robots working, so I gave up. However, some new coins, such as goat, had a price difference between their on-chain prices and the contract market and spot market for a period of time.
You can set reminders for price differences in advance on TradingView, especially for spot orders with arbitrage. When a crash occurs, there is a chance to close the position at a negative premium.
The second is to place orders in advance.
That is, the plunge followed by a spike. According to the situation this time, the maximum drop of BTC and ETH is about 10% relative to the sideways trend; the maximum drop of mainstream currencies such as defi and doge is about 20%; the maximum drop of altcoins is 30-40%. The reason for this magnitude is actually related to the opening habits of contracts. A 10% drop will liquidate leverage of more than 10 times, and a 20% drop will liquidate leverage of more than 20 times.
Then, when we place orders, we can adopt the "Rule of 789". The so-called "Rule of 789" means that when we judge that a big crash is about to happen, we use the high point or high sideways price as the benchmark, and place orders according to BTC, mainstream, and copycat at 10%, 20%, and 70% of the base price respectively. In order to avoid some errors, we can place orders separately with a floating rate of 3% up or down.
After the crash, what do you think of the market?
At this point in the market, Bitcoin has exceeded 100,000 US dollars, a number that has attracted attention both inside and outside the circle. It has risen 5 times relative to its lowest point, and Ethereum has also risen 4 times relative to its lowest point. Other mainstream altcoins have also increased by several times or even more than ten times. From a price perspective alone, it has definitely reached a high range where profits can be taken. This is also the logic behind the batch selling points that I have been talking about in the past few days.
But what is certain is that the bull market is still there, because the price of BTC is still strong. And this wave of plunge has made this round of bull market healthier. The peak of the bull market originally planned for 2025 will just meet expectations because of this drop, but it may enter the halftime break next~
According to experience, a bull market decline is definitely a good opportunity to add positions, but this big drop came very late, not with the initial rise of the bull market, and two consecutive large-scale liquidations will cause certain damage to the market. In theory, it needs to be repaired, so you can slowly add positions. The best point to add positions is the next second bottom. It is also worth noting that the current time node is superimposed with the impact of the two holidays, foreigners’ Christmas and our Spring Festival. Historically, there will be outflows of funds during holidays, and traders are more likely to understand a wave at the end of the year and lock in profits.
To summarize my judgment, the general bull market trend is still there, especially in the long term, next year's bull market is more worth looking forward to; in the medium term, there may be large fluctuations, one is to digest the recent rise, and the other is to continue the long and short explosions in the contract market; in the short term, you can buy/bottom out before the second retracement and make a rebound.
Thanks for your attention!
