What exactly happened in this cycle, and can we buy the dip now? The reason is right here!

Sector rotation is happening! After the AI boom, which sector is next to rise? It turns out that smart money is quietly positioning in these two coins!

The Federal Reserve is up to something again, deciding not to cut interest rates this year? Let's see what happened.

First, let’s talk about a serious topic. The current environment in the crypto market has indeed encountered some issues.

According to the latest data this week, the U.S. ISM non-manufacturing index rose unexpectedly from 52.1 to 54.1, far exceeding market expectations. To make matters worse, the Labor Department's job vacancy data showed that vacancies reached 8.09 million, well above the market expectation of 7.74 million.

All the data above represents a resurgence of inflation and a decline in expectations for Federal Reserve rate cuts, which is why U.S. stocks have started to plunge recently, dragging the crypto market down with them.

Currently, BTC support is around the previous lows of 91,000 and 92,000, and ETH is also near its previous lows. I think we can buy the dip; even if the market doesn’t reverse, there should at least be a rebound we can take advantage of.

Furthermore, the hot job market has made it more difficult for the Federal Reserve to cut interest rates. Currently, the interest rate expectation for the end of this year is 4.25%, while the current rate is 4.5%. This means the market believes the Federal Reserve will only cut rates once this year, far below the previously expected 4 or 5 cuts, which is the fundamental reason why the crypto market and U.S. stocks have been unable to rise.

At the same time, this is also the biggest difference between this bull market and the last one, because the last bull market saw a massive influx of liquidity due to the pandemic, and prices rose continuously. In contrast, this bull market has seen interest rates cut by half and then suddenly no more cuts, isn’t that a trap? We are truly having a hard time.

The only silver lining is that the U.S. dollar has appreciated significantly, making everyone’s USDT worth more relative to the Chinese yuan or New Taiwan dollar, having risen by a full 9%. You can sell one Bitcoin for more yuan or other fiat currencies, which is a silver lining in the midst of misfortune.

But I personally believe that the market has actually overreacted, because with the Federal Reserve's interest rates so high, inflation cannot really continue to rise. In crypto terms, this CPI is just a rebound after a crash, and once it's finished rebounding, it will go down again.

Federal Reserve official Bostic stated that he believes U.S. inflation fluctuations are only temporary and will continue to decline this year, eventually reaching their target of 2%.

Everyone can see it clearly, the Federal Reserve may maintain high interest rates for a while, but when inflation comes down, they will rapidly cut interest rates, which means suffering first and sweetness later.

Now I will particularly focus on Friday's unemployment rate and employment data. I think the probability of another piece of bad news is not that high, as the bad news has already been priced in these past two days, and people have already anticipated a hot job market.

But you know, once employment data falls below expectations, it will be a pleasant surprise, and both the crypto market and U.S. stocks will soar, so bad news won’t lead to much decline, but good news will cause a sharp increase. So keep an eye on the data this Friday.

After discussing the big trends, let’s look at some profit opportunities in smaller coins. In this wave of crashes, which coins will be future hotspots worth buying the dip?

After the AI boom driven by Nvidia, I believe these two sectors are about to explode as well, with the first being DeFi.

The main proposal in the Ethereum Prague upgrade is EIP3074, which is a bombshell for the DeFi sector. This update allows batch processing of transactions, combining multiple transactions into one and only calculating gas fees once, which will greatly reduce costs.

Additionally, the EIP3074 proposal allows third parties or apps to pay or sponsor gas fees, which is very friendly for newcomers. In the future, DeFi transactions might not need to prepare gas fees specifically; project teams can pay upfront, and users will deduct the gas fees after the transaction, simplifying the complex process to just one click, while all gas fee calculations run in the backend, making it very convenient.

Now, DeFi data is also skyrocketing, with borrowing amounts breaking historical highs, but whether it's AAVE or Uni, their coin prices haven't even reached half of their previous highs, which means they are significantly undervalued.

Moreover, Uni is set to launch its V4 upgrade and its own dedicated layer 2 network in the first quarter of this year. Coupled with the upcoming Ethereum upgrade, this will benefit the ETH ecosystem. Therefore, DeFi sectors like Uni and AAVE are truly worth positioning for a wave. Additionally, the coin Puffer is also promising, as it has investors like Binance Labs and many other heavyweight VCs, with a luxurious background, and it hasn’t yet been listed on Binance, so the probability of it being listed later is quite high.

Additionally, the low-cap coins are currently truly being ignored, thoroughly washed out. I think this is actually an entry opportunity, because this market segment will eventually rotate back in, just like before when Pepe saw a crazy washout, but we bought when it was being ignored, and it exploded several times afterward. So low-cap coins can indeed be positioned; I personally favor Pepe the most, followed by Floki, while other low-cap coins are not very stable.

I believe this dip is Ethereum's last chance to get in. Just look at the chart.

ETH tends to perform particularly well from January to May, making it hard to lose money. Especially in January, except for the bear markets of 2019 and 2022, it has seen significant increases. Currently, ETH has only risen 2% in January, but if it achieves an average increase of 20%, it could reach $4000 or even higher.

Now that it has pulled back significantly due to various bad news, I believe this is a very good opportunity to get in. Even if you get stuck, it will only be temporary, and it will eventually rise. Even if things don’t go well, by March when Ethereum upgrades, all issues will be resolved. It can be said that investing in ETH carries no risk of losing money, as long as you don’t get liquidated due to greed.

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