Let’s review why there was a drop yesterday. In 24 hours, 580,000 people were liquidated, with a liquidation amount exceeding 10 billion RMB. The anticipated plunge in a bull market has arrived. How can we predict a plunge as accurately as possible? What might the market look like next? And for some friends holding losing contracts, fearing liquidation, what should they do? Follow me, learn a little every day. I believe many people lost everything last night; this is what I often say, the fast bull market is the one that eats people without spitting out bones. However, those who saw my market review yesterday should also have seen my warning about this big drop. Many people actually lost money in this drop due to cognitive issues because money earned by luck will definitely be lost back through cognition. If you've lost money, you need to improve; otherwise, you will continue to lose in the future. This review is not intended as any investment advice, just a personal review. #加密市场回调

The first question: Why did the plunge happen:

From the perspective of K-lines and funding rates:

From the comparison of BTC and ETH price K-line charts above, it is evident that the drop in the past two days was a planned and targeted liquidation behavior by the main players. The drop on the 6th was aimed at BTC, and the drop on the 10th was aimed at altcoins. So, were there any signals in the market before these two drops?

The most intuitive data signal is the change in funding rates. Before the BTC spike, the funding rate for BTC skyrocketed to 50%-70% (0.05%/8 hours), almost the craziest time in this round of market. However, before the decline, the funding rate began to drop. A similar situation occurred before the altcoin spike; due to good market sentiment, the funding rate was extremely exaggerated. But the day before the decline, the funding rate suddenly plummeted, and by night, almost half of the altcoins dropped to the usual 0.01%/8 hours.

Matching the situation: BTC has broken above 100,000 several times only to drop again, with the overall price continuously declining slightly. Then, just before the big drop, at around 10:45 PM, there was a short-term surge; BTC briefly spiked above 100,000, pushing market bullish sentiment to its peak before officially starting the plunge.

From the perspective of the maximum pain point of options, on December 27, there was still 13.78 billion USD pressing at the maximum pain point of 80,000, giving market makers endless motivation to pull it back, or else they would face huge losses. This is why I predict that the risk of rising above 100,000 is very low, but the probability of dropping is very high, combined with the issue of funding rates, which suggests that a plunge may occur.

What is most interesting at the moment is that the Fear and Greed Index is still at 78, indicating greed. ETF players probably didn't notice any major earthquake after a good night's sleep. In fact, this is also the evolution of the entire crypto space aligning with mainstream trends; it’s fun to touch altcoins for a while, but in the end, they all have to be returned.

The second question: What will the next trend look like:

Currently, at this position, BTC is still consolidating. If there are no sell-offs from ETFs or other institutions tonight, the short-term panic should ease. This round of decline has not broken the previous low of 90,500, and the fundamentals have not changed much, remaining in a consolidation range. However, currently, the probability of a downward move is still higher than upward; in other words, it is not suitable for dollar-cost averaging or opening contracts. The contracts that should have been liquidated for altcoins have mostly been liquidated, washing out players with high risk tolerance. The next step is the process of rebuilding the bottom, and if it continues, it will start to wash out spot players. The key still lies in whether BTC can stabilize.

The third question: What to do with losing contracts?

Firstly, high-leverage contracts should not be played, and one shouldn't even touch contracts. However, since high-leverage contracts are already in hand, and they are altcoins, if losing money and not liquidated yet, there's no point in regretting. I believe those who are in danger now are the ones who opened long positions. In the short term, it is indeed very close to the liquidation position, and one can open a reverse contract for hedging. In a bull market, reverse hedging generally requires buying more than selling, meaning that long positions should lean towards being long. How much to hedge mainly depends on one’s risk tolerance; open positions that one can sleep soundly without watching, to avoid waking up to liquidation. Then repeatedly confirm the profits of long and short positions inside to minimize losses. Additionally, contracts that will be liquidated are those without stop-loss settings. Those without a stop-loss level shouldn't be playing contracts in the first place. This loss is definitely tuition; if you’re playing contracts with a lot of money, you should first learn the operational mindset well. $BTC $ETH $BNB

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