4Alpha Research Analyst: Cloris

Recently, the market experienced a significant crash, with Bitcoin dropping nearly 13% within 24 hours, falling below the $53,000 mark. At the same time, global capital markets were also affected, with major declines in U.S. stocks, the South Korean KOSDAQ, and the Japanese Nikkei index. Faced with such a large drop, one can't help but question whether the market has entered a bear phase. Where are the upcoming opportunities?

Let’s explore the analysis and future trend judgments of our top trader, Terran, who is also a senior figure in the industry, from three dimensions: cycles, technical analysis, and macroeconomic factors regarding the current crypto market.

1. What stage of the cycle is the market currently in? Has the bull market ended?

Terran indicated that he tends to observe the cyclical correlation between the U.S. stock market and the crypto market. However, he has recently noticed that the cyclical positions of the two do not completely align, which has caused him some confusion.

From the perspective of the U.S. stock market, it is currently at an 80% probability of being at a top position, but there is also a 20% chance of evolving into a super bubble. From the crypto market's perspective, he is more inclined to judge that it is in the middle stage of the cycle.

When asked why he chose to close positions while believing the crypto market is still in the middle stage, Terran explained that although the crypto cycle is not yet clear, the influence of the U.S. stock market cannot be ignored. He ultimately decided to use the U.S. stock cycle as a benchmark because it has a significant impact on the crypto market.

Additionally, Terran mentioned that in past cycles, the movements of the U.S. stock market and the crypto market were highly correlated, but this time there has been a divergence. He believes that observing a single market in the case of inconsistent cycles may lead to erroneous decisions. Therefore, he prefers to use the U.S. stock cycle as a risk control standard and refrains from participating in all risk assets.

When discussing the psychological cycle of investors and the valuation level, Terran stated that both are currently at a middle level. He believes this is a relatively "garbage" time period, not suitable for operations, and that investors should do more observing.

As for whether there are other leading indicators to evaluate the current cycle stage of BTC, Terran expressed that he does not lean towards seeking too many explanations or indicators. He emphasized that in a poor position of the U.S. stock cycle, prioritizing risk control and refusing to participate in risk assets is a wiser choice.

2. Can the current technical patterns provide us with good insights?

Terran pointed out that the market is currently in a clear downtrend and does not recommend taking long positions. He emphasized that while buying at this position does not necessarily mean a loss, a misjudgment could lead to significant risks.

Terran further explained that using technical indicators as a risk control measure can help investors avoid losses from extreme market fluctuations. He cited past market crashes as examples, noting that adhering to technical signals can significantly reduce losses. He advises investors to remain cautious when market trends are poor and to adopt a bearish mindset.

When asked if there are still profit opportunities in the current market environment, Terran mentioned several possible signals: stabilization of U.S. stocks, support for Bitcoin prices, and an overall shift from bearish to bullish patterns. However, he also emphasized that predicting the specific timing of market reversals is very difficult due to the high uncertainty of market movements. He suggests that investors should respect market realities and avoid excessive predictions to cope with potential market fluctuations.

Regarding trading strategies, Terran stated that he prefers right-side trading, meaning buying when market trends are clear. He emphasized that choosing the timing for selling is more complex, and even he has not perfectly solved this issue. Nevertheless, his overall strategy is to seek profits while controlling losses.

On the question of the current market stage of Bitcoin, Terran believes it is in the middle stage. He explained that based on his indicators and market observations, although Bitcoin prices have risen, they have not yet met the criteria for a bull market. He believes that a true bull market requires Bitcoin to reach new highs and continue rising, accompanied by the prosperity of the entire market, and it seems that the bull market has not truly arrived yet.

Additionally, Terran expressed reservations about Ethereum. He stated that due to a lack of clear understanding of Ethereum's revenue sources and the absence of signs of large-scale application and frenzied usage, he holds a cautious attitude towards Ethereum. He emphasized that until its value is proven, he tends to believe that Ethereum does not have the potential to outperform the broader market.

3. From a macro perspective, how should we judge the future trend of BTC?

When asked if the stock market crash on Monday was a significant reason for BTC's decline, Terran clearly pointed out that there is indeed a close relationship between BTC prices and other assets in the capital market. If BTC's short-term price movements are disconnected from other assets, he is more inclined to believe that there is a deviation in the BTC market itself rather than a pricing issue in the stock market. In fact, the high correlation between BTC and the Nasdaq index once reached 90%, strongly proving that BTC is not a traditional safe-haven asset but has significant risk asset attributes.

In terms of investment strategies to cope with this wave of declines, Terran particularly emphasized the importance of risk control. He advocates that investors should set clear rules when formulating trading strategies, such as promptly stopping losses when prices reach the cost price to avoid irreversible losses. Additionally, a low-cost buying strategy is considered key to success, as it provides investors with greater flexibility in a volatile market. Therefore, at this stage of the market, he chooses to close positions.

Looking ahead to the second half of the year, Terran holds a cautious attitude towards interest rate cut expectations. He believes that although traders have long anticipated interest rate cuts, the market reaction may not be as expected when the cuts actually occur. However, he does not completely deny investment opportunities in the second half of the year, pointing out that the pullback in the U.S. stock market may be short-term, and different levels of pullbacks require different amounts of time. Therefore, investors should remain cautious while closely monitoring market dynamics to capture potential opportunities.