Is the bull market gone? Is cryptocurrency a Ponzi scheme?

In recent days, the market has still been quite sluggish, oscillating in the range of $55,000 to $59,000. Since Bitcoin dropped and closed below the EMA200 last week (July 5), there has been a significant change in the market, and this breakdown technically seems to indicate that the short-term upward trend since last September has been broken. As shown in the figure below.

However, we still maintain the viewpoint from previous articles: this round of the bull market has not ended; the current market phase resembles a "bear market trap," and the real bull market has yet to arrive.

Here, we assume using EMA200 as a reference indicator, with a breakthrough of the 200-day line as a "bull market" and a drop below the 200-day line as a "bear market." We can see that since Bitcoin broke through the EMA200 again in January last year (2023), there have been relatively long periods of correction. For example, after breaking below the EMA200 last August, it experienced a correction lasting over two months before rebounding again. As shown in the figure below.

Moreover, since October last year, Bitcoin has maintained a relatively good upward trend and even broke through its ATH (all-time high). However, after dropping below the EMA200 last week, many people indeed expressed panic and disappointment towards the market. From the current overall situation, the upcoming adjustment may continue for a while (possibly until September). During this period, for ordinary retail investors, we only suggest you do the following two things:

First, if you haven't started building your position or have plans to do so, you might consider buying Bitcoin in batches (note: in batches) during this time.

Second, as Bitcoin enters correction, the volatility of altcoins will increase significantly. Be sure to assess your risk tolerance reasonably and focus only on those altcoin projects with strong narratives.

If you are already fully invested and are considering whether to cut losses and retrieve some principal, my personal view is that as long as you are not holding those coins that could potentially go to zero (or have already gone to zero), it might be better to continue waiting patiently for 1-2 months to see how things unfold.

Although there are currently many negative factors, such as the German government's sale of Bitcoin and the MtGox compensation, there are still some potential positive factors we can keep an eye on, such as:

- The U.S. presidential election. Based on Trump's recent actions and performances, if he wins the upcoming presidential election, it could trigger a significant rise in cryptocurrency prices. We won't discuss any political issues here.

- The Federal Reserve's interest rate cuts. Given the current situation, it is only a matter of time before the Federal Reserve cuts rates. If they officially start cutting rates on September 18, it could lead to a new bull market for all risk assets, including cryptocurrencies.

- Inflows into ETFs. Recently, ETF inflows have turned positive again, with major institutions like Blackrock still buying on dips amid market panic.

As for what will happen during the next two months of correction, it is currently uncertain. However, technically, Bitcoin has a very strong support level around $50,000 - $52,000. If no new special events occur, it should be difficult to break below this level in the short term. But if it does break below, the next range could be around $44,000 - $46,000.

And I still want to say, if such extreme situations occur, don't hesitate; just continue to buy in batches. Perhaps, a year from now, when you look back at the current market, it will feel similar to how you feel when looking back at the market in August and September of last year.

Compared to Bitcoin, which is currently correcting, altcoins have already dropped significantly, but it cannot be ruled out that there may still be a 10%-20% pullback in the next 1-2 months. Therefore, we mentioned above that it is essential to assess your risk tolerance reasonably and focus only on those altcoin projects with strong fundamentals and narratives.

In other words, aside from core assets like ETH and SOL, you might consider adding a few leading projects with popular narratives to diversify your investment portfolio. For example, under narratives like AI, RWA, and GameFi, you can accumulate some coins that you have always been optimistic about but haven't had the chance to buy, taking advantage of the recent significant pullback.

Here, we can casually cite a few examples from a technical perspective to assist in your search for direction (not investment advice):

For example: Ondo Finance (ONDO)

Ondo Finance is a project in the RWA field, currently incubating protocols that support the tokenization of real-world assets and traditional cryptocurrencies. It is also the first project (company) to tokenize exposure to U.S. Treasury bonds. We introduced this project in an article back in January last year (2023). Since the official launch of the ONDO token in January this year (2024), it has increased about tenfold from its ATH price, and the current market cap of the project is $1.435 billion, with Market Cap / FDV = 0.14 and Market Cap / TVL = 2.58. From the chart, around 0.85 seems to be a good short-term support level, as shown in the figure below.

Of course, the project will have a new round of large unlocks next year, which also needs to be monitored. As shown in the figure below.

Another example: Ronin (RON)

Ronin is a project in the GameFi field, built by Sky Mavis, the developer of Axie Infinity, as an Ethereum sidechain that supports EVM-compatible smart contracts and protocols. We mentioned this project in an article back in February last year (2023). The project token RON was launched in 2022, and after enduring a bear market, its price rose from a low of around 0.2 to 4.45, breaking its historical high, and is currently correcting to around 1.9, with Market Cap / FDV = 0.34. From the chart, it seems to have nearly reached its basic drop level at this stage, as shown in the figure below.

Of course, this token also has ongoing unlocks, so don't forget to use the Token Unlocks tool to monitor its real-time linear unlocking situation.

The above are just two casual examples. The main idea is to look for projects that align with popular narratives (or the sectors you are most optimistic about), have no significant issues in their fundamentals, and appear to have reached their basic correction levels on the charts. However, if your risk tolerance is not that high, you can maintain your current position without making any changes while waiting for Bitcoin to return above the EMA200 before considering whether to add to your position.

In summary, we remain long-term optimistic about the market's development and believe that the big bull market (the peak of this round of the bull market) has not yet arrived. Personally, I have not sold any of my eight-layer Bitcoin positions in this round of dollar-cost averaging. If I start selling, I will inform everyone in the group immediately. During this relatively fearful phase of the market, what you need to do is not panic but maintain a necessary level of greed and be prepared to buy at any time. Those who have not experienced darkness and challenges cannot welcome true light, and those who have experienced light will not fear a new round of darkness and adjustments because they believe that the sun will continue to rise tomorrow.

Speaking of greed and fear, I just remembered that a few days ago, Boss Yu shared a small strategy for dollar-cost averaging based on the FGI (Fear & Greed Index) in the group, as shown in the figure below.

Although many people know about this indicator, I feel that not many can persist in long-term dollar-cost averaging based on it, as most people's inner desire is to make money quickly. The market sometimes resembles a series of tortoise and hare races; many people seem to understand that the tortoise may win the race in the end, but most people will still choose to be the hare shortly after the race begins.

The Fear and Greed Index is an emotional indicator that reflects the sentiment of the crypto market, with values ranging from 0 (extreme fear) to 100 (extreme greed). If we look at historical data, we can clearly see that this index can almost reliably indicate the market's tops and bottoms at different stages. When we compare this index with Bitcoin's price movements, we find that they perfectly overlap, and the current FGI value is the same as that in January last year (2023), indicating that we are likely at the bottom range of the new cycle's market phase (the redder the index, the closer Bitcoin's price is to the top, and vice versa). As shown in the figure below.

Having discussed the market in recent days, let's briefly touch on an old topic: Is cryptocurrency a Ponzi scheme?

A few days ago, I saw someone discussing whether cryptocurrency is a Ponzi scheme. In fact, this claim has not disappeared since the day Bitcoin was born. Personally, I will not debate this issue with anyone; I neither agree nor disagree.

Everyone has the right and freedom to speak, and discussing whether cryptocurrency is a Ponzi scheme is not illegal. You are certainly entitled to that opinion. However, what I want to express is that even if every cryptocurrency is a Ponzi scheme, so what? This claim can only prevent you from participating in cryptocurrency or influence those around you from participating; it does not have any substantial impact on cryptocurrency itself.

I believe the argument of whether cryptocurrency is a Ponzi scheme is not important; what matters is how you make wise choices in a financial game.

For example, when the BRC-20 concept first emerged, there would always be a group of smart (or lucky) people entering the market, forming the first wave of buying power. As retail investors discover and gradually enter the market, the earliest participants may start planning to sell. Of course, this example reflects a short-term mindset; while it may bring considerable profits in the short term, it may also lead to significant losses. Only those projects with solid technology or community foundations (including KOL endorsements) may break through short-term limitations and continue to perform well over a longer time frame.

Besides BRC-20, MemeCoins are also a great example. The popularity and performance of MemeCoins in this round have already surpassed many altcoin projects, such as the representative PEPE and WIF. Taking PEPE as an example, I remember mentioning this token in an article back in April last year (2023), as shown in the figure below.

PEPE fits our earlier description well; during its initial launch, only a small number of smart (or lucky) individuals entered the market. However, as discussions about it increased on social platforms (like X), more and more people (including many KOLs) became interested. Thanks to the continuous growth of the corresponding community, after the first batch of people took profits, following a period of community building (popularity accumulation), and with the onset of the bull market, PEPE re-entered a new round of larger-scale explosions, attracting many new investors. As shown in the figure below.

In short, building a strong community (cult-like following) around a particular token may turn it into a perfect investment tool. Whether projects like PEPE and WIF are Ponzi schemes is, from an investment perspective, no longer that important. When a new thing (including concepts) is born, we should not immediately seek to deny it but rather try to understand how it works and whether it can help us make money.

The emergence of any new thing essentially stems from a hope, which is one of the strongest emotions of humanity. From this perspective, tokens (projects) that can instill more hope in people may, at certain stages of development, even surpass those with solid technological innovations. This is one reason why some MemeCoins with strong community foundations can explode in popularity. For example, in terms of market capitalization, SHIB ranks ahead of Chainlink, and PEPE has already surpassed many company-level projects like Cosmos and Maker.

Therefore, you can certainly look down on those MemeCoin tokens that lack any technological innovation or even choose to ignore them. However, if you approach it with an investment mindset and a desire to make money, the key to thinking about such tokens should be: how to identify those tokens that will have a strong community foundation in the early stages and try to understand them. Of course, this process can be quite challenging for newcomers, as they may sometimes struggle to distinguish between a strong community and a pyramid scheme, with one step leading to "heaven" and another to "hell."

However, to avoid someone potentially falling from one extreme to another, I must reiterate that some tokens only have short-term speculative value. You can use them to speculate or make money during specific development stages, but if you look at a longer time horizon, only those projects with solid technology and vision will have a future.

We will conclude this issue here, marking the 484th article updated by Hu Li Hua Wai.