Alright, everyone’s asking: What’s happening!? Why is the market crashing!? Should I buy or go back to working at McDonald's!?
All the answers are right in front of you, you just need to analyze them.
Here’s what’s happening and the likely scenarios 🧵👇
Current Market Situation
Since Saturday, $BTC has been in free fall, dropping from $68,500 to $52,000 in 3 days (-24%), putting the entire crypto market in the red.
The first question is: Is this the end of the cycle? Are we officially in a bear market?
The answer is NO, here’s why👇
Cycle Analysis
All cycles follow a scenario characterized by dominance:
→ Money is in Bitcoin, then flows to altcoins, then flows to stablecoins (end of the cycle).
Since September 2022, dominance has only increased and hasn't had those sharp declines characteristic of the top of a cycle.
Characteristics of a Cycle Top:
- Dominance Drops Sharply
- BTC Weakens as Liquidity Moves to Alts
- Alts Reach Their Highest Point
At the top of a cycle, most smart money takes their gains, and retail investors serve as exit liquidity.
Currently, dominance is still rising; it hasn't reached its peak yet. Liquidity has not yet moved to alts, which means we haven't reached the top of the cycle.
Why is Everything Crashing?
Looking at the indicators, this looks like a drop caused by a crisis.
We had a similar situation in March 2020 during the COVID crisis, which caused Bitcoin to lose more than 50%. And we all saw what happened afterward when Bitcoin played its role as a haven.
Crisis Indicators:
- Stock Market Collapse: $3 trillion wiped from the US stock market due to growing fears of a global recession.
- Geopolitical Tensions: War in the Middle East is imminent, potentially triggering World War III.
- Rising Defense Stocks: Lockheed Martin has gained more than 20% in just a few days, indicating preparations for conflict.
Likely Scenarios
Scenario 1⃣: Bull Trap (Most Likely)
- Market Rebound: The market will rebound in the coming days/weeks.
- Conditions: Geopolitical situation must stabilize, and there must be good catalysts for the ecosystem (interest rate cuts, Trump election, ETFs, etc.).
- Outcome: Bullish scenario.
Scenario 2⃣: Confirmed Crisis
- Global Conflict: The world plunges into chaos with a global conflict originating from the Middle East, worsening civil wars in Europe, and continuation of the Russo-Ukrainian conflict.
- Impact: Catastrophic in the short term, but Bitcoin could eventually rise as a safe haven.
- Long-Term Outcome: Collapse of fiat currencies, leading to increased Bitcoin dominance and potentially record highs.
Strategies and Tips
Short-Term Strategies
1. Avoid Panic Selling: Maintain emotional control and re-evaluate your positions.
2. Use Dollar-Cost Averaging (DCA): Invest a fixed amount regularly to reduce volatility impact.
3. Diversify Your Portfolio: Spread risk across different assets.
4. Set Stop-Loss Orders: Limit potential losses automatically.
Long-Term Strategies
1. Focus on Fundamentals: Invest in projects with solid fundamentals.
2. Hold Through Volatility: Long-term holding can be more beneficial than frequent trading.
3. Hedge with Stablecoins: Preserve capital during extreme volatility.
4. Stay Informed: Keep up with the latest news and developments.
Opportunistic Strategies
1. Buy the Dip: Look for buying opportunities during significant dips.
2. Participate in Staking/Yield Farming: Earn passive income.
3. Engage in Community and Networking: Gain valuable insights and early information on trends.
Risk Management
1. Set Realistic Goals: Have clear investment goals and timeframes.
2. Emergency Fund: Maintain liquidity reserve to cover unforeseen expenses.
3. Limit Leverage: Use leverage cautiously and be aware of the risks.
By staying informed, managing risks, and being disciplined, you can protect your investments and potentially capitalize on opportunities during periods of market turmoil. Remember, every downturn has historically been followed by a recovery, and being prepared can help you emerge stronger.
