Bitcoin broke its all-time high again yesterday, reaching a high of $108,353. At the same time, altcoins not only failed to keep up with the rise, but also showed signs of falling!
Therefore, many retail investors are ready to curse: when Bitcoin was over 40,000, the altcoins in their hands were at this price, and now Bitcoin is about to reach 110,000, and it is still at this price! This has led many people to believe that this is Bitcoin’s bull market, and altcoins have no chance in this round of halving.
So, as Bitcoin continues to break new highs, and even after breaking the psychological barrier of $100,000, why do altcoins continue to stagnate? Will the altcoin season come next? How should we deal with the following market conditions?
Bitcoin hits new high, why do altcoins continue to slump?
Since Bitcoin fell to touch $49,000 in August this year, it has continued to rise until it broke through the psychological barrier of $100,000 this month. Although it experienced a big correction just after breaking $100,000, it broke the historical high again after only four days of correction. It can be said that it is very powerful.
The rise of Bitcoin is mainly due to the Federal Reserve's interest rate cuts, the entry of a large number of institutions after the approval of the spot ETF, the halving expectations and changes in the international policy environment. Analyzing these reasons, we can not only find out why Bitcoin keeps breaking new highs, but most of the altcoins remain stagnant.
From the perspective of the Fed’s rate cut, there should be good liquidity in the market after the rate cut, and the rise of Bitcoin will lead to a general rise in the market, but the reality is that the current market has no money and cannot rise generally. Since the Fed’s rate cut in September, it has been three months now. The money released has just flowed into the cryptocurrency circle through banks, bond markets, stock markets, and housing markets. Bitcoin has been flooded through ETFs, and Bitcoin has been inflated, and then a large amount of water will overflow to flood other currencies. Now is the stage of filling up the Bitcoin pool.
After the approval of the Bitcoin spot ETF, a large number of institutions entered the market, and most of this money was concentrated on Bitcoin. The logic is easy to understand. At present, in the entire crypto market, only the Bitcoin pool is large enough to accommodate these large amounts of funds and allow them to enter and exit freely; and the risk is the lowest. The logic of large funds is different from that of small funds. They pay more attention to risk control than to yield. Therefore, after these institutional funds pushed up Bitcoin, some of the overflow almost went to mainstream currencies that have already been tested by the market, such as XRP, DOGE, BCH, etc. Among them, niche altcoins or new currencies have relatively no outstanding performance.
The current international environment is not peaceful. According to relevant data, at least 30 countries are currently in a state of war or quasi-war. Bitcoin, which has been proven to be a safe-haven asset, is undoubtedly more popular in this situation. As a globalized and decentralized asset, it attracts many investors to buy it, causing Bitcoin to continue to rise and reach new highs.
And now, whether it is El Salvador declaring Bitcoin as legal tender, or the newly elected US President Trump wanting to establish Bitcoin reserves, and listed companies represented by Tesla and MicroStrategy continuing to buy Bitcoin, all have pushed Bitcoin to a new height; these factors are not possessed by a number of altcoins.
It can be said that in the current situation of insufficient market liquidity and relatively volatile environment, it is normal for Bitcoin, as the face and foundation of the entire currency circle, to attract all the funds. Currently, Bitcoin's market value accounts for 56.6%, which has begun to show a downward trend compared with 59.3% in early November. This is actually because the funds in Bitcoin have begun to overflow, and the phenomenon of altcoins may soon be reversed.
Mad cow is coming, it is the harvest season of copycat season!
In this round of rise, the market generally believes that it will hit the 120,000 node. In fact, at this point in time, no matter how effective Bitcoin is in hitting the new high of 120,000, it is time for the "water flow" to overflow and irrigate other altcoins.
I briefly mentioned this in the article: Bitcoin hits 120,000, is the bull market coming? How to catch the bull market? , so let me expand on it:
1. On the 16th, which is Monday this week, ETH finally broke through the high point created by the bull market in March this year. After 8 months, ETH finally broke through 4,100 US dollars. As a weather vane of altcoins, the wind has started to blow; no matter what, ETH is the public chain with the richest ecology and its market value has always been ranked second. After ETH's breakthrough, the countdown to the next altcoin season has really begun.
2. The performance of the Alt Season Index actually rose to 86 in early December. However, due to a wave of sharp declines, the Alt Season Index fell even more severely, and Bitcoin took the lead in breaking through. Now the Alt Season Index has dropped to 63, but it is only a thin layer of window paper away from the Alt Season's starting value of 75.
3. From the historical market, 7/8 months after the halving, the altcoin season is when it explodes; for example, the second Bitcoin halving was completed in July 2016. Seven months after the halving, that is, by the beginning of 2017, the price of Bitcoin rose to around US$1,000, ushering in an epic bull market. ETH became the leader of altcoins, soaring 140 times. A number of altcoins such as LTC and XRP also began to grow explosively during this period.
In May 2020, Bitcoin was halved for the third time. Seven to eight months after the halving (from the end of 2020 to the beginning of 2021), Bitcoin broke through the high value of $20,000. The altcoin market began to usher in the "DeFi boom" and "NFT boom". UNI, AAVE, COMP, AXS, Flow, etc. began to become hot spots. Other well-known altcoins such as BNB, ADA, FIL, DOT, etc. also began to soar one after another, driving the entire altcoin market to explode. It has been exactly eight months since the halving in April 2024, and all external conditions are in place. It is the time for the altcoin to explode.
4. From the overall environment, the current market is calm and there are no risk events for the time being. The next major events are the Federal Reserve’s interest rate decision at 3 a.m. on the 19th and Trump’s swearing-in as President of the United States on January 20, 2025. Both of these events are considered favorable financial events.
Regardless of the data indicators or historical market conditions, it is now the time for altcoins to explode. After Bitcoin breaks through the key price mark, it will also begin to overflow and feed back other currencies. At this time, that is, in each round of halving market The most exciting and craziest mad bull market, the outbreak of the copycat season is the most prominent feature of this mad bull market, and it is also the season when most investors gain the most.
What should we do to face the bull market?
From the above, we can see that the bull market is about to come. So at this stage, what should we do to seize the opportunities that may come at any time?
The most important thing is to establish an investment strategy that suits you and continuously optimize it based on practice. Investment strategy includes many aspects and is a comprehensive "project": including target selection, capital allocation, transaction method selection, etc. Due to space limitations, I will mainly talk about asset allocation here.
Compared with the traditional investment market, the crypto market is still very "young". Many mature strategies in the traditional investment market can be used as references in the crypto market. For example:
The 80% rule: In this rule, the proportion of venture capital depends on your age. The formula is: the proportion of total investment in the crypto market = (80-your age) * 100%.
For example, if you are 25 years old, the total amount of money you invest in the crypto market can account for (80-25)*100%=55% of your total assets.
As people age, their ability to resist risks decreases, and the proportion of risky investments needs to be gradually reduced.
4321 rule: This rule is an investment law summarized by investors in long-term investment and financial planning, which is used to guide people's capital allocation when investing. Specifically in the crypto market, it can be applied as follows:
40% of the funds are used for safe investments, such as hoarding BTC and ETH, and participating in the deposit and interest earning of mainstream exchanges such as Binance and Bitget.
30% of the funds are used for insurance investment, and you can choose the leading currencies in various concept sectors, such as the public chain projects mentioned earlier: SUI, TIA, APT, DOT, AVAX, etc., as well as AI concepts: FET, AGIX, AI, WLD; MEME tokens: DOGE, SHIB, PEPE, etc.
20% of the funds are used for risky investments. You can choose some small-cap currencies, or even go to the primary market to become a "10U God of War" and take certain risks to obtain higher returns.
10% of the funds are used for venture capital. You can choose to trade financial derivatives such as contract trading and currency leverage, increase leverage, take the risk of forced liquidation, and obtain excess returns.
Faced with a wide variety of currencies and market methods with varying risks, only reasonable allocation and scientific investment can achieve the best balance between investment returns and risks.
Conclusion
After introducing some specific methodologies, let's discuss some metaphysical theories. Whether it is judging the stage of the entire bull market or formulating some specific investment strategies, it should be logical, rather than making decisions arbitrarily, and then continue to fall into the same pit after breaking your thigh.
For example, using the principle of "development view" to look at the overall process of the fourth Bitcoin halving:
The essence of development is the emergence of new things and the demise of old things, corresponding to the sharp drop at the beginning of each halving and the gradual recovery of lost ground and rising to new highs;
The road of development is a combination of progress and twists and turns. It corresponds to each pullback caused by internal and external factors, but the overall trend is still rising.
The state of development is the unity of quantitative change and qualitative change, which corresponds to the repeated testing and shock of Bitcoin every time it breaks through important pressure points, and finally breaks through the heavy pressure and soars into the sky;
How to judge the overall market development stage, and the rise of a certain currency? This is very important, because only by participating in the early stage of the development of things can you get super high returns. Figuratively speaking: even if a certain currency is a garbage, leeks-cutting project, you can still eat "hot" if you participate in it in the early stage; on the contrary, even if it is a gold mountain, you can only dig a pile of stones if you participate in it in the late stage of its development.
Making logical judgments on things is far more reliable than making judgments based solely on feelings, and it can better support you to see the essence through phenomena, make correct decisions, and persevere to the end.
Back to the current specific market situation, every time Bitcoin breaks a new high, it will immediately go up, almost without exception, mainly to blow up those who chase the rise with high leverage. The way of rising three times in one step is disgusting, but isn’t it more pleasant to say that it is rising while washing the market? If nothing unexpected happens, Bitcoin will go to 120,000 this time. When Bitcoin stagnates, it will be the time for altcoins to take over and rise.
