Answers to Questions About the Market Crash (3)

A reader asked what to do if Bitcoin reaches $100,000 and altcoins remain stagnant.

This question is worth deep consideration, as the current trend in the U.S. stock market reflects a similar situation.

Before referencing the U.S. stock market, let's first review the cryptocurrency market.

Investors who have experienced previous bull markets should have this memory: in past bull markets, when Bitcoin and Ethereum surged, as long as altcoins weren't fundamentally weak or had poor teams, they would also see their own spring.

However, in the recent half-year trend, Bitcoin has already broken through its previous high of $69,000, but most altcoins are still only experiencing slight increases or even stagnation.

Based on past experiences, this phenomenon can also be seen as indirect evidence that we are not yet in a bull market.

Yet this phenomenon raises doubts about whether another situation might occur:

That is, the fundamental logic of the market may have changed unconsciously: even if Bitcoin and Ethereum both break their previous highs and enter a bull market, most altcoins may still remain flat or only slightly increase, no longer replicating the past bull market's flourishing situation.

This logic has been increasingly validated in the U.S. stock market. The trend of the U.S. stock market in recent years clearly reflects this situation: aside from a few major tech giants, most U.S. stocks have been quite sluggish or have limited gains.

I remember that around 2019 or even earlier, some well-known fund managers said that the U.S. stock market had a significant bubble. Their basis was that the stock prices of the major tech giants had already risen significantly, approaching the situation before the Nasdaq crash in 2000.

However, as the years went by, aside from the brief crash in 2020 due to the pandemic, the U.S. stock market continued to surge under the leadership of the major tech giants, consistently pushing the three major indices to new highs.

As a result, more and more Wall Street managers changed their views.

The new perspective is:

The soaring stock prices of the major tech giants are strongly supported by robust performance, and compared to their performance growth rates, their stock price bubbles are not significant;

Moreover, in the past when the U.S. stock market experienced bubbles, various stock prices would rise dramatically, but this phenomenon does not exist in today's U.S. stock market, as many stocks with poor performance remain neglected.

Therefore, despite the U.S. government's monetary easing over the years, the liquidity released has not flooded into any stocks but has continuously flowed into quality stocks. This market, where high-performing stocks soar while junk stocks remain flat, does not exhibit the severe bubble that people imagine.

Thus, as long as the major tech giants continue to perform well, the U.S. stock market will likely reach new highs.

I believe this thinking is quite enlightening for considering the question raised by the reader.

Now that the Bitcoin ETF has been approved, if we assume that the U.S. Securities and Exchange Commission will also approve the Ethereum ETF in the future, which types of assets will the potentially large inflows of traditional funds primarily target?

I believe that in terms of liquidity, safety, and reliability, they will most likely focus on Bitcoin and Ethereum.

This is similar to Wall Street capital's enthusiasm for tech giants.

If this assumption is confirmed, then the cryptocurrency market may indeed see Bitcoin or both Bitcoin and Ethereum surge, while other altcoins remain neglected.

Of course, when I say that altcoins are neglected, I don't mean that all altcoins won't rise, but rather that many altcoins without any highlights may no longer surge alongside the market as they did before.

Therefore, we may also need to adjust our judgment methods in a bull market.

In past bull markets, I judged the frenzy of the market not only by looking at Bitcoin and Ethereum but also by paying close attention to altcoins. Once I noticed that altcoins were rising too dramatically, I would consider it an indicator of high risk in the bull market.

However, in the upcoming bull market, I will focus more on Bitcoin and Ethereum. When I feel that these two still have room for growth, I will continue to hold; when I feel that their growth potential is exhausted, I may not care about the performance of other altcoins and will consider starting to exit.