The signal of phase 'trend decline' has appeared for the first time!

Introduction

The current cycle of the crypto market presents many unprecedented characteristics compared to the past. For the first time, facing a complex situation of macroeconomic tightening and global elections in a bull market cycle; for the first time, breaking historical highs before the Bitcoin halving event; for the first time, welcoming the approval of spot ETFs recognized by traditional financial markets; and even expected to be included in the financial reserves of developed countries. All these historic events fill people with expectations for the future.

As a trend investor in the crypto market, I always maintain rationality. My goal is not only to increase the dollar value but, more importantly, to increase the number of BTC I hold through trend judgment. The existence of trends and cycles essentially reflects the market's supply-demand relationship, emotional changes, and the profit-seeking nature of capital. Therefore, identifying trend signals through on-chain data analysis to make rational investment decisions is key to profiting in the market.

Trend Review and Current Market Status

In March 2024, after Bitcoin's price broke $73,000, it entered a months-long trend of sideways decline. Until October, the market again touched the $60,000 support level, ushering in a new round of rising trend. From October to December, the market maintained a strong upward trend, but recent data suggests that this strength may have shown signs of decline.

The 'three elements' of trend decline

In previous analyses, I proposed the 'three elements' for judging the decline of phase trends:

Long-term holders (LTH) accelerate distribution: When long-term holders begin to sell off in large volumes, it indicates they believe prices are nearing a high.

Massive profit-taking: The market has seen a massive profit-taking behavior, indicating that some investors choose to cash out.

Declining peak of profit-taking: Even when prices rise, the peak of profit-taking shows a downward trend.

From on-chain data, these three elements first appeared simultaneously in early December. The distribution by LTH and profit-taking both intensified, while the scale of profit-taking began to decline, indicating that market demand may gradually fail to support prices from continuing to rise.

Key Data Analysis

1. Slowing capital inflow

As shown in the chart, the trend of market capital inflow often determines the momentum of prices. When capital inflow slows down, the upward momentum of BTC will also weaken. Similar phenomena occurred in May 2021, November 2021, and April 2024. In this trend, the capital inflow from November 24 to December 7 showed a declining trend. If the peak of capital inflow cannot be restored in the short term, BTC prices will face the risk of correction.

2. Shrinking new demand

From the perspective of new demand data, whenever there is a surge in new demand in the market, Bitcoin prices typically experience a strong upward trend. However, the influx of new demand has significantly weakened currently. The chart shows that the scale of market demand after November is lower than that in March this year, only showing an improvement in market sentiment. If new demand cannot continue to flow in, the market will enter a consolidation period and may even face a correction.

3. Changes in market sentiment

The dominant force of market sentiment has also changed recently. Data shows that the main market driving force currently comes from Asian investors. Although US investors briefly showed active sentiment in early December, it quickly fell back. The European market appears relatively calm due to the upcoming Christmas holiday.

To maintain BTC's upward momentum, the key lies in whether the US market can reactivate capital inflow and new demand. If the sentiment of US investors cannot improve, the probability of market correction will further increase.

Market Strategies and Responses

In response to the signals of trend decline, my strategy is to take profits in batches rather than waiting for the market to provide a single 'selling point.' In a bull market, trends usually do not end suddenly but gradually decline. Therefore, rationally planning selling points and locking in profits in phases is an effective risk management measure.

Of course, no trading system is perfect. If the market suddenly reverses due to new positive news, such as a surge in capital inflow or renewed new demand, I will pause the profit-taking plan and patiently wait for new selling signals.

Conclusion

The decline of the trend does not mean that the bull market has ended, but rather reminds investors to be more cautious. After signals appear, the inertia of market sentiment may still drive prices to rise slightly. Therefore, flexible responses and taking profits in batches are the strategies I am currently adopting.

In the crypto market, the boundaries of cognition determine investment returns. As long as the trading logic is reasonable, aligns with risk appetite, and can be executed, it is worth persisting. But it is essential to remember that data cannot predict the future; being ready to adjust strategies based on market changes is crucial to remain undefeated in the waves of the crypto market.

Today's article ends here; feel free to come to the homepage to play together~

Investing involves risks; the above content is personal sharing and does not constitute investment advice!